A Mutual Fund is an investment scheme that pools investments from people and invests the collective monies in various marketable instruments. An Asset Management company (AMC), an investment management firm, is formed that manages these investments. The AMCs manage the investment of the fund according to the allocation criteria mentioned in the fund’s offer document. A fund manager is appointed by the AMC who is in charge of the fund. AMCs collect money from investors & deploy them in equity, debt or money market.
The money is invested in capital market such as equities, bonds, debentures etc. Thus from time to time, the fund value of the investment changes depending on the Net Asset Value (NAV). A NAV represents a fund's per share market value. This is the price (bid price) at which investors buy fund units of the AMC. An NAV computation is undertaken once at the end of each trading day based on the closing market prices of the portfolio's securities. Investment allocation in a mutual fund is made in the form of units. These units are derived by dividing the total value of all the cash and securities in a fund's portfolio, less any liabilities, by the fund’s NAV.
Investment in mutual funds is not risk free, but we at Mahajani Consultants monitor and analyze the performance of various AMCs and accordingly make recommendations. We offer advice on selecting the fund, tracking investments and evaluating fund performance periodically. We monitor the growth of the customer’s investment and send valuation statements of their accounts periodically. We are affiliated with all the leading AMC fund houses for offering Mutual Fund investment options.
Closed-ended fund: Investment in a closed-ended fund can be done only when the initial public subscription (new fund offer) is issued. These funds are open for a limited period. After that we can buy or sell the units as shares only when these funds are listed in the stock exchange. Closed-ended fund stocks represent an interest in a specialized portfolio of securities managed by the fund manager. This specialized portfolio typically concentrates on a specific industry, geographic market, or sector. Maturity period of such funds is 3 to 5 years. Closed-ended funds market values depend upon the supply and demand of fund.
Open-end fund: Majority of mutual funds are open-ended. By continuously selling and buying back fund shares, these funds are a good option for investors. When the fund manager determines that a fund's total assets have become too large to effectively execute its stated objective, the fund will be closed to new investors and in extreme cases, be closed to new investment by existing fund investors.
Mutual Fund Classification
Mutual Funds can be classified into the following categories according to the type of investment:
Equity Fund: In this type of a mutual fund, major proportion of the investment allocation is done in stocks of public companies. Stocks are often categorized by their market capitalization (caps), and can be defining in three basic sizes: small, medium and large. In Equity funds, allocation in large-cap segment of companies is higher than mid- or small-cap ones. Equity funds are usually preferred by investors with a medium-to-high risk appetite.
Debt Fund: In this type of a mutual fund, the primary focus is on giving a fixed income; i.e. short term long term bonds etc. Allocation in such funds is done in government securities and bonds, RBI bonds etc. These investment instruments usually give assured but moderate returns. Debt funds are usually preferred by investors with a low-to-medium risk appetitie.
Growth Fund: A Growth Fund offers higher potential capital appreciation. Investment allocation in this type of a mutual fund is done in growing companies or companies with above-average growth in earnings that reinvest their earnings into expansion, acquisitions, and/or research and development. Thus Growth funds are comparatively more volatile. Investing in growth funds requires a tolerance for risk and a holding period with a longer time horizon.
