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Mutual Funds 1
Mutual Funds 1
The investors in the Mutual Fund are given the share in its total funds
which is proportionate to their investments, and which is evidenced
by the unit certificates.
As per the regulations of SEBI, the mutual funds are required to send
the dividend warrants within 30 days of declaration of the dividend.
And, the proceeds form repurchase or redemption must be dispatched
within 10 working days from the date on which the request is made by
the unit holder.
Advantages and Disadvantages of Mutual Fund Investments:
Many investors cannot directly invest in instruments such as CDs, CPs,
and TBs because the minimum required investment in them is quite
large.
iv. It has been observed that over a medium to long term, mutual funds
have the potential to provide a high return as they invest in a
diversified basket of selected securities.
ix. Many Mutual Funds not only cater to the need of the investors but
also allow them to switch from one fund to another according to the
investor’s choice.
x. Above all, Mutual Funds are highly regulated as it is mandatory for
them to get registered with SEBI and also they function within the
provisions of strict regulations designed to protect the interests of
investors.
ii. On the one hand, diversification reduces risk; but on the other hand,
diversification has a disadvantage of dilution. This implies that
investment in a single security may double its value over a certain
period whereas in a mutual fund investment, the security counts
only a small part.
iii. Despite the liquidity of mutual funds, most mutual funds (particularly,
open-ended funds) cannot be bought or sold in the middle of the
trading day. One can only buy and sell them at the end of the day once
current value of holdings is calculated.
iv. Mutual Funds usually maintain large cash reserves as protection against
a large number of simultaneous withdrawals. Although this provides
investors with liquidity, it means that some of the fund’s money is
invested in cash instead of assets, which tends to lower the investor’s
potential return.