Mutual Fund Notes For B.COM IV Sem Section-A
Mutual Fund Notes For B.COM IV Sem Section-A
Com(p)-IV sem
section –A
Prepared by:
Ms.Deepika,
Assistant Professor
Commerce Department
2. If the fund sells securities that have increased in price, the fund has
a capital gain. Most funds also pass on these gains to investors in a
distribution.
3. If fund holdings increase in price but are not sold by the fund manager, the
fund's shares increase in price. You can then sell your mutual fund shares
for a profit in the market.
Mutual funds offer a wide variety of investment choices. You can choose them basis your risk
appetite, financial goals and time horizon. Here’s how -
Interval Funds
These funds are a hybrid of open and close ended funds. While they operate mainly as close ended funds,
these funds may trade on stock exchanges and are open for sale or redemption at predetermined intervals
at the prevailing NAV.
Equity/Growth Funds
If you are investing in equity growth funds, then you are largely putting your money in stocks. The main
objective of these funds is to achieve long-term capital growth. Equity funds invest at least 65% of their corpus
in equity and equity-related securities. These funds may invest in a wide range of industries/sectors or focus on
one or more sectors. These funds are suitable to invest in if you have a higher risk appetite and you have a long
term financial goals.
Debt/Income Funds
Following a simpler approach, debt/income funds usually invest 65% of the amount in fixed income securities
such as bonds, corporate debentures, government securities (gilts) and money market instruments. These funds
are likely to be less volatile than equity funds.
Balanced Funds
With an aim to provide stability of returns and capital appreciation, balanced mutual funds invest in both
equities and fixed income instruments. These funds generally tend to invest around 60% in equity and 40% in
debt instruments such as bonds and debentures.
Gilt Fund
Gilt mutual funds invest exclusively in government securities. The Gilt funds do not carry a credit risk - where
the issuer of the security can default. However, it comes with an interest rate risk i.e. risk due to the rise or fall
in interest rates.
Other Funds
Tax saving funds
The Income Tax Act offers tax deduction under specific provisions of the Income Tax Act, 1961. Designed to
generate capital growth, ELSS mutual funds invest primarily in equities and largely suit investors with a higher
risk appetite for capital appreciation. Spread over medium to long-term, tax saving funds comes with a lock-in
period of 3 years.
Index Funds
Index funds are attached to a particular index such as the BSE SENSEX or the S&P CNX NIFTY. Their
performance is linked to the results of that index. Here, the portfolio comprises stocks that represent an index
and the weightage assigned to each stock is in line with the identified index. Hence, the returns will be more or
less similar to those generated by the Index.
Sector-specific Funds
Sector-specific funds invest in the securities of a specific sector or industry such as FMCG, Pharmaceuticals,
IT, etc. The returns on these funds are directed by the performance of the respective sector/industries.
Sector funds allow an investor to diversify funds across multiple companies within an industry. These funds
tend to be riskier as the performance is directly linked to that of the overall sector.
Here’s are 7 reasons (in no particular order) that you should consider
buying mutual funds:
https://www.investopedia.com/terms/m/mutualfund.asp
https://www.principalindia.com/new-investor-basics/types-of-mutual-fund-schemes
https://money.mobikwik.com/resources/mutual-funds-best-way-start-investing
https://www.investopedia.com/terms/n/nav.