A mutual fund pools in money from many investors and invests the money in stocks, bonds, short-term money-market instruments, other securities or assets, or some combination of these investments. All mutual funds are required to be registered with SEBI before they launch any scheme.
Salient features of mutual funds are:
1. Professional management - Money is invested through fund managers with proven expertise in the field of investment.
2. Diversification - Diversification is an investing strategy that can be summed up as investing small amounts of your money in different investment options like different schemes of mutual funds and holding shares of multiple companies.
3. Economy of scale - A mutual fund buys and sells large amount of securities at one go. This makes its transaction cost lower than what an individual would pay for securities transactions.
4. Liquidity - Just like individual shares, mutual fund units can be converted into money through sale in the market or through redemption.
5. Simplicity - Buying a mutual fund unit is simple and the minimum investment amount required is small.
6. Tax Benefits - Different mutual fund categories are subjected to different tax treatments. It is important to understand the tax benefits of a fund before you invest in it.
Mutual funds are segregated in different categories based on the objectives of the mutual fund scheme. The schemes are designed to keep in mind the needs of various types of investors, risk averse investors (basically a conservative Investor who does not want to take high risk), moderate investors (investors who can take some amount of risk) and aggressive investors (investors who are willing to take risk in search of higher returns).
Categorization of Mutual Funds
Mutual funds are broadly categorized into five schemes mentioned as below:
If you want to invest in mutual fund you will be open free mutual fund account in mutual fund status website.
Product Labelling of Mutual Funds
As per SEBI guidelines, mutual funds are to be labelled according to the level of risk involved and the same is to be depicted on the risk-o-meter. The different labels and risk-o-meter are mentioned as below:
What is Systematic Investment Plan (SIP)?
An SIP or a Systematic Investment Plan allows an investor to invest a fixed amount of money regularly in a mutual fund scheme. It lets you set aside a fixed sum of money at regular intervals (weekly, monthly or quarterly) with an objective to gain capital appreciation in the longer run. SIP investment inculcates the habit of savings. Instead of trying to time the market, by investing on a regular basis, the investor benefits from the rupee-cost averaging factor. As the investments are done over different market cycles, the investor benefits from the market volatility by getting to buy more units of the same fund when the markets are low and buying less units when the prices are high.
An investor can invest a pre-determined fixed amount as low as ₹500/- in a scheme every month or quarter, depending on his/her convenience through post-dated cheques, through Standing instruction (SI) facility or through ECS (Electronic Clearing Service) facility. Investors need to fill up an application form and SIP mandate form on which they need to indicate their choice for the SIP date (basically when the pre-determined amount will be invested). Subsequent SIPs may be auto-debited through a standing instruction, electronic clearing service or post-dated cheques.
Commodity Derivatives Market
What are commodities?
Commodities are goods with economic value. They are earth's natural products which are produced and traded. They are usually raw materials for further processing. The broad types of commodities are as under:
1. Agricultural commodities: Food & non-food crops.
2. Non-Agricultural commodities: Metals, Energy, Polymers, etc.
3. Others: cattle head, processed foods like juices, etc.
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