Mutual funds are investment companies that are registered under the Trust Act. There are so many features of mutual funds & Mutual funds are best for investors interested in investment but don’t have so much knowable about investment products, stock markets etc.
Top 15 Features of Mutual Funds
Following are the characteristics of Mutual Funds
1.Government Regulation
Asset Management Companies are established under the Companies Act to organize the fund and make other arrangements. All mutual funds (Securities and Exchange Board of India) in India are registered with SEBI.
2.Money In Experts Hand
Fund managers are appointed by asset management companies who are experts and professionals in the field of investment.
3.Small Units
Mutual funds divide their capital into small parts for the purpose of collecting money from the general public. These parts are simply called units or shares of mutual funds.
4.Pre-Announcement
Prospectus is issued by mutual fund companies to collect money from the general public, which mentions the investment objectives, types of schemes, amount of risk, etc. Investors who buy units of mutual funds are called unit holders. He is considered a shareholder in the same proportion as the number of shares purchased by the investor.
The amount collected by mutual funds is called ‘common fund’ in common parlance.
5.Diversified Investment
Money collected from the general public is invested by fund managers in shares, debentures, bonds or government securities, etc. of companies listed on the stock exchange.
6.Custodian
A custodian is appointed for the security and arrangement of these securities.
7.Investors Objectives
Since the number of investors is large and everyone has different investment objectives, mutual funds also collect money by running schemes with different investment objectives and invest that money according to the investment objective of the investors.
8.Creating a Group of Investors with the Same Goal
The financial goals of all the investors investing in any one scheme of mutual funds are almost the same.
9.Equally Distribution of Output
The profit, loss or expenses that come as a result of investments made by mutual funds are divided among the investors in the ratio of the shares purchased by them.
10.Freedom to Exit
Once the investors have made the investment, if they want to sell the mutual fund, they can exit by selling their stake. For this, the Net Asset Value (NAV) of investment by mutual funds is declared on a daily or weekly basis. Investors can liquidate by selling their units based on this NAV.
11.Ability to Take Decisions
Mutual fund companies are corporate and autonomous entities that are capable of taking their own decisions.
12.Small Commission
Mutual Funds charge investors some fees for these services, which is known as Entry Load. This fee is also announced in the prospectus. However, entry load is not taken in all mutual funds.
13.Types of Values
There are only two types of values in mutual funds. One at face value, another at the time of launching the NAVI scheme, when the investor buys the units, the units are available at the face value but after they are listed in the market, the units are available at the NAV.
14.Transparent Transactions
No mutual fund can sell its units in a wrong way without issuing prospectus. The declarations made in the prospectus cannot be changed later.
15.Certificates
When investing in mutual funds, the fund house has to give a certificate of the unit or statement of account.
Conclusion
Mutual funds are most popular investment product among the investors. Mutual funds are very safe & easy to investments. Now days MF is increasing there volume because of small investor gaining there trust due to above mention features of mutual funds.
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