Monday, January 23, 2017

Mutual funds serve various investment related needs of investors ...

Mutual funds manage our money - almost everyone knows about this. However, most often, some of the other functions related to investing are forgotten. These are also taken over by asset management companies, making life very simple for investors. Click on the link here to read further ...


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The English translation is as under:



“If I have Rs. 100 to invest, how much money should I invest in mutual funds and how much in stocks?” Recently, someone asked this question.
This is an oft-repeated question, asked in various forums and in many different ways. Some ask as a simple question as mentioned above. Some frame their questions using technical terminology as: “How much should I allocate to mutual funds out of a total fund of Rs. 100?”
What is the correct answer in such cases? Should you allocate 30% to mutual funds? Or does it depend on a person’s situation? Or risk profile? Or age?
The person asking such questions has probably not understood what mutual funds really are and is considering mutual funds as just another product – a substitute of stocks, for example.
Are mutual funds really another option for investing in stocks? It is important, hence, to understand what mutual funds are and how these are different from the traditional investment avenues.
A mutual fund is not an investment by itself, but outsourcing the investment management and administration function to a professional organization. Instead of investing in various instruments ourselves, we can outsource that job to a professional organization.
Within a mutual fund company, there are people that take care of some very important functions:
·      Fund management team: This team handles functions related to management of funds, which involve securities research, decisions regarding buying and selling of securities, execution of trades through brokers, and other paper work related to the same.
·      Fund accounting team: This team manages the accounting function related to the investors’ money invested in the scheme.
·      Registrar and transfer agency: This team is the record keeper of investor data and transactions. This team also maintains the records of unit balance in each of the investment folio. It also takes care of issuance of account statements, as well as dividends and various investor transactions in the folio.
·      Custodian: This is an outside agency and not part of the mutual fund company. They keep custody of the securities and settle trades with the clearing house of the stock exchanges, where the trade takes place. It is a security feature that the custodian is never part of the asset management company.
In other words, you get much more than just a portfolio manager by investing through a mutual fund. And, yes, just to reiterate, you also outsource the function of finding relevant and suitable investment avenues to professionals.
So, let us come back to the question asked in the beginning, “If I have Rs. 100 to invest, how much money should I invest in mutual funds and how much in stocks?”
The answer is, “You can invest all your money through mutual funds”. There are various different kinds of mutual fund schemes to cater to various requirements of investors. There are various conveniences built into these. You take your pick. Identify your need and go take the advantage of mutual funds.
- Amit Trivedi

1 comment:

  1. Hey, thanks for the information. your posts are informative and useful. I am regularly following your posts.FXGM

    ReplyDelete