MUTUAL FUNDS
Mutual funds Weallthbid
Mutual funds are a type of certified managed combined investment schemes that gathers money from many investors to buy securities. There is no such accurate definition of mutual funds, however the term is most commonly used for collective investment schemes that are regulated and available to the general public and open-ended in nature. Hedge funds are not considered as any type of mutual funds.
Mutual funds are identified by their principal investments. They are the 4th largest category of funds that are also known as money market funds, bond or fixed income funds, stock or equity funds and hybrid funds. Funds are also categorized as index based or actively managed.
In a mutual fund, investors pay the funds expenditure. There is some element of doubt in these expenses. A single mutual fund may give investors a choice of various combinations of these expenses by offering various different types of share combinations
Why Choose Us
The fund manager is also known as the fund sponsor or fund management company. The buying and selling of the funds investments in accordance with the funds investment is the objective. A fund manager has to be a registered investment advisor. The same fund manager manages the funds and has the same brand name which is also known as a fund family or fund complex.
As long as mutual comply with requirements that are established in the internal revenue code, they will not be taxed on their income. Clearly, they must expand their investments, limit the ownership of voting securities, disperse most of their income to their investors annually and earn most of their income by investing in securities and currencies.
Mutual funds can pass taxable income to their investors every year. The type of income that they earn remains unchanged as it gets transferred to the shareholders. For e.g., mutual fund distributors of dividend income are described as dividend income by the investor. There is an exception: net losses that are incurred by a mutual fund are not distributed or passed through fund investors.
Advantages of Mutual funds
- Increase in diversification.
- Liquidity on a daily basis.
- Professional investment management.
- Capacity to participate in investments that may be available only for larger investors.
- Convenience as well as service.
- Government oversight.
- Easier comparison
Types of Mutual funds
Open-end funds
In open-end mutual funds, one must be willing to buy back their shares from investors at the end of every business day at the net asset value that is calculated for that day. Most of the open-end funds also sell shares to the public on every business day. These shares are also priced at a particular net asset value. A professional investment manager will oversee the portfolio or selling securities whichever is appropriate.
Close-end funds
Close-end funds generally issue shares to the public just once, when they are created via an initial public offering. These shares are then listed for trading on a stock exchange. Investors, who don’t wish any longer to invest in the funds, cannot sell their shares back to the funds. Instead, they must sell their shares to another investor in the market as the price they may receive may be hugely different from its net asset value.
SEBI Categorization
Definition of Large Cap, Mid Cap and Small Cap
This list would be uploaded on the AMFI website and the same would be updated every six months based on the data as on the end of June and December of each year. The data shall be available on the AMFI website within 5 calendar days from the end of the 6 months period.
Only one scheme per category would be permitted
| Sr.No. | Category of Schemes | Scheme Characteristics | Type of scheme (uniform description of scheme) |
|---|---|---|---|
| 1 | Multi Cap Fund | Minimum investment in equity & equity related instruments- 65% of total assets | Multi Cap Fund- An open ended equity scheme investing across large cap, mid cap, small cap stocks |
| 2 | Large Cap Fund | Minimum investment in equity & equity related instruments of large cap companies- 80% of total assets | Large Cap Fund- An open ended equity scheme predominantly investing in large cap stocks |
| 3 | Large & Mid Cap Fund | Minimum investment in equity & equity related instruments of large cap companies- 35% of total assets Minimum investment in equity & equity related instruments of mid cap stocks- 35% of total assets | Large & Mid Cap Fund- An open ended equity scheme investing in both large cap and mid cap stocks |
| 4 | Mid Cap Fund | Minimum investment in equity & equity related instruments of mid cap companies- 65% of total assets | Mid Cap Fund- An open ended equity scheme predominantly investing in mid cap stocks |
| 5 | Small cap Fund | Minimum investment in equity & equity related instruments of small cap companies- 65% of total assets | Small Cap Fund- An open ended equity scheme predominantly investing in small cap stocks |
| 6 | Dividend Yield Fund | Scheme should predominantly invest in dividend yielding stocks. Minimum investment in equity- 65% of total assets | An open ended equity scheme predominantly investing in dividend yielding stocks |
| Sr.No. | Category of Schemes | Scheme Characteristics | Type of scheme (uniform description of scheme) |
|---|---|---|---|
| 1 | Overnight Fund** | Investment in overnight securities having maturity of 1 day | An open ended debt scheme investing in overnight securities |
| 2 | Liquid Fund $** | Investment in Debt and money market securities with maturity of upto 91 days only | An open ended liquid scheme |
| 3 | Ultra Short Duration Fund | Investment in Debt & Money Market instruments such that the Macaulay duration of the portfolio is between 3 months - 6 months | An open ended ultra-short term debt scheme investing in instruments with Macaulay duration between 3 months and 6 months |
| 4 | Low Duration Fund | Investment in Debt & Money Market instruments such that the Macaulay duration of the portfolio is between 6 months- 12 months | An open ended low duration debt scheme investing in instruments with Macaulay duration between 6 months and 12 months |
| 5 | Money Market Fund | Investment in Money Market instruments having maturity upto 1 year | An open ended debt scheme investing in money market instruments |
| 6 | Short Duration Fund | Investment in Debt & Money Market instruments such that the Macaulay duration of the portfolio is between 1 year – 3 years | An open ended short term debt scheme investing in instruments with Macaulay duration between 1 year and 3 years |
| 7 | Medium Duration Fund | Investment in Debt & Money Market instruments such that the Macaulay duration of the portfolio is between 3 years – 4 years | An open ended medium term debt scheme investing in instruments with Macaulay duration between 3 years and 4 years |
| 8 | Medium to Long Duration Fund | Investment in Debt & Money Market instruments such that the Macaulay duration of the portfolio is between 4 – 7 years | en ended medium term debt scheme investing in instruments with Macaulay duration between 4 years and 7 years |
| 9 | Long Duration Fund | Investment in Debt & Money Market Instruments such that the Macaulay duration of the portfolio is greater than 7 years | An open ended debt scheme investing in instruments with Macaulay duration greater than 7 years |
| 10 | Dynamic Bond | Investment across duration | An open ended dynamic debt scheme investing across duration |
| 11 | Corporate Bond Fund | Minimum investment in corporate bonds- 80% of total assets (only in highest rated instruments) | An open ended debt scheme predominantly investing in highest rated corporate bonds |
| 12 | Credit Risk Fund | Minimum investment in corporate bonds- 65% of total assets (investment in below highest rated instruments) | An open ended debt scheme investing in below highest rated corporate bonds |
| 13 | Banking and PSU Fund | Minimum investment in Debt instruments of banks, Public Sector Undertakings, Public Financial Institutions- 80% of total assets | An open ended debt scheme predominantly investing in Debt instruments of banks, Public Sector Undertakings, Public Financial Institutions |
| 14 | Gilt Fund | Minimum investment in G secs- 80% of total assets (across maturity) | An open ended debt scheme investing in government securities across maturity |
| 15 | Gilt Fund with 10 year constant duration | Minimum investment in G secs- 80% of total assets such that the Macaulay duration of the portfolio is equal to 10 years | An open ended debt scheme investing in government securities having a constant maturity of 10 years |
| 16 | Floater Fund | Minimum investment in floating rate instruments- 65% of total assets | An open ended debt scheme predominantly investing in floating rate instruments |
**Provisions of SEBI Circular No SEBI/IMD/DF/19/2010 dated November 26, 2010 shall be followed for Uniform cut-off timings for applicability of Net Asset Value in respect of Liquid Fund and Overnight Fund.
$ All provisions mentioned in SEBI circular SEBI/IMD/CIR No.13/150975/09 dated January 19, 2009 in respect of liquid schemes shall be applicable
^ Words/ phrases that highlight/ emphasize only the return aspect of the scheme shall not be used in the name of the scheme (for instance Credit Opportunities Fund, High Yield Fund, Credit Advantage etc.)