Mutual Funds
A mutual fund is a type of professionally managed collective investment vehicle that pools money from many investors to purchase securities. While there is no legal definition of the term “mutual fund”, it is most commonly applied only to those collective investment vehicles that are regulated and sold to the general public. They are sometimes referred to as “investment companies” or “registered investment companies.” Most mutual funds are “open-ended,” meaning investors can buy or sell shares of the fund at any time. Hedge funds are not considered a type of mutual fund.
Following are the top five big benefits of investing in Mutual Funds.
1. The Advantage of Professional Investment Management: Mutual funds provide full-time, high quality professional management services by pooling the resources of many hundreds of investors. The high level of professional management is a vital key to profoundly satisfying results mutual funds enjoy in today’s complicated and volatile markets. The fund manager’s goals and interests are tied to your success because their paycheck is based on how well the fund performs rather than on sales commissions. The fund manager has instant access to real market information and is able to make trades on very large and therefore cost-effective securities packages.
2. Diversification: A major advantage of mutual funds is that they invest in a wide range of options from stocks to bonds to money market securities. This diversification limits risk because a decline in the value of any specific security is offset by the stability or increasing value of other securities in the package. Shareholders benefit from a level of diversification made possible by the amount of pooled investment dollars that most individual investors would not be able to achieve.
3. Low Cost, High Quality Investing: An average investor could not create a well-balanced portfolio holding a meager 50 stocks. It would be too expensive. The investments alone would be about $150,000 and then there would be fees and commissions and accountants compensations on top of that. A mutual fund lets you buy into a diversified portfolio for as little as $50. in some circumstances. Typically you can get started in a well-managed fund for under $1000.
4. Convenience and Flexibility: Mutual Fund managers study the market, analyze the securities, make all the decisions on what to buy and sell, clip the coupons, collect all the interest payments and make sure dividends on the fund’s securities are received, recorded and disbursed. They protect the interest of the shareholder (you) and are available to answer questions or to buy and redeem fund shares either online or on the telephone. While you own just one security you have all the benefits of a widely diversified portfolio.
5. Mutual Fund Investments are Liquid and Easy to Withdraw: Mutual Funds can be traded in (redeemed) at any time so cash is available in an emergency. You can request (redeem) funds by electronic transfer, letter, phone, or simply by writing a check against the shares depending on the type of fund you are invested in. The money will be in your hand in about three business days.
Right Available to a Mutual Fund Holder
1. Receive unit certificates or statements of accounts confirming your title within 30 days from the date of closure of the subscription under open-ended schemes or within 6 weeks from the & date your request for a unit certificate is received by the Mutual Fund
2. Receive information about the investment policies, investment objectives, financial position, and general affairs of the scheme.
3. Receive dividend within 30 days of their declaration and receive the redemption or repurchase proceeds within 10 working days from the date of redemption or repurchase.
4. Vote in accordance with the Regulations to
a. change the Asset Management Company
b. wind up the schemes.
5. Receive communication from the Trustees about change in the fundamental attributes of any scheme or any other changes which would modify the scheme and affect the interest of the unitholders and to have option to exit at prevailing Net Asset Value without any exit load in such cases.
6. Inspect the documents of the Mutual Funds specified in the scheme’s offer document. In addition to your rights, you can expect the following from Mutual Funds
