Mutual Funds - An Overview
Mutual fund is an investment tool where fund is collected from many investors and invested in a portfolio of securities (e.g. equities, bonds, money market securities etc.) which is managed by investment professionals.
Individuals who deal with mutual funds are called fund managers and their responsibilities primarily include:
-Researching stocks
-Build an investment thesis for each stock
-Estimate the amount of money to invest in each stock
-Build an equity portfolio
-Track individual stock and overall portfolio
-Measure the returns, performance, and risk at periodical intervals
-Report to clients
Large scale fund manager
On a broad scale, there are "fund managers" who can serve millions of consumers and provide the same service to each one of them.
Customers in the context of "fund management" are those seeking "fund management" services. These large-scale fund managers often use a mutual fund framework to conduct their business.
An Asset Management Company (AMC), is a company where a fund manager works and manages your money
Investment process:
- Investors buy mutual fund units from Asset Manager (e.g. IDLC Asset Management Limited) in exchange for their invested fund.
- Expert fund management team manages that fund to generate return in accordance with the investment objective of the fund.
- This return is distributed among the investors of the fund in the form of dividend.
- Investors can also enjoy capital gain by selling their mutual fund units back to the asset manager.
Benefits of Mutual Fund
Professional fund management
Making good investment decisions entails a lot of time and hard work including research, analysis, market timing and constant tracking. Generally, people lack the specialized skills and/or time needed for making good investment decisions. By investing in mutual fund, you can get your fund managed by professional fund managers who have that specialized skills and experience.
Diversified investment
Mutual Funds make diversified investment in different categories of securities e.g. equities, bonds, money market instruments etc. which reduce the risk associated with the total investment portfolio.
Tax savings
Whether you make one-time or regular investment in Mutual Funds, you can avail tax rebate on the full investment at the end of the fiscal year and thus implicitly amplify the return on your investment.
Liquidity
You can liquidate your investment in mutual funds fully or partially anytime by selling directly the units to Asset Management Limited at the prevailing NAV.
Customized product
Some investors prefer low risk investment with low return, while other may prefer high risk investment with high return. Some may opt for only regular income, while others may want long-term capital appreciation. IDLC Asset Management Limited offer different types of IDLC Mutual Funds catering to these different investment needs of investors.
