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What is a Mutual Fund?
A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciations realized are shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. The flow chart below describes broadly the working of a mutual fund:
What are the advantages of investing in Mutual Funds?
  • Professional Management
  • Diversification
  • Convenient Administration
  • Return Potential
  • Low Costs
  • Liquidity
  • Transparency
  • Flexibility
  • Choice of schemes
  • Tax benefits
  • Well regulated
How does an organization of a Mutual Fund work? 
There are many entities involved and the diagram below illustrates the organizational set up of a mutual fund

What are the types of mutual fund schemes?
By Structure Open
  • Ended schemes
  • Close Ended Schemes
By Investment Objective
  • Growth Schemes
  • Income Schemes
  • Balanced Schemes    
  • Money Market Schemes
Other Schemes
  • Tax saving schemes
  • Special Schemes- Index & Sector Specific Schemes
What does a mutual fund do with my money? 
Depending on your investment objectives and future needs, you can choose to buy a particular number of units of a fund. A mutual fund invests the pool of money collected from the investors in a range of securities comprising equities, debts, money market instruments etc., with a nominal AMC fees. In proportion to the number of units you hold, the income earned and the capital appreciation realised by the scheme will be shared with you accordingly.
What is an asset management company (AMC)?
An AMC is a company that manages a mutual fund.
For all practical purposes, it is an organized form of a money portfolio manager which has several mutual fund schemes with similar or varied investment objectives. The AMC hires a professional money manager, who buys and sells securities in line with the fund's stated objective.
How is investment in a mutual fund different from a bank deposit?
When you deposit money with the bank, the bank promises to pay you a certain rate of interest for the period you specify.
On the date of maturity, the bank is supposed to return the principal amount and interest to you. Whereas, in a mutual fund, the fund manager invests your money as per the investment strategy specified for the scheme. The profit, if any, minus manager expense, is reflected in the NAV or distributed as income. Similarly, loss, if any, with the expenses, is to be borne by you.
How are mutual funds regulated?
SEBI and/or the RBI (in case the AMC is promoted by a bank) regulates all Asset Management Companies (AMCs). In addition, every mutual fund has a board of directors that represents the unit holders' interests in the mutual fund.
What is NAV(Net Asset Value)?
Net Asset Value is the market value of the assets of the scheme minus its liabilities. The per unit NAV is the net asset value of the scheme divided by the number of units outstanding on the Valuation Date.
What is Sale Price?
Is the price you pay when you invest in a scheme. Also called Offer Price. It may include a sales load.
What is Repurchase Price?
Is the price at which units under open-ended schemes are repurchased by the Mutual Fund. Such prices are NAV related.
What is Redemption Price?
Is the price at which close-ended schemes redeem their units on maturity. Such prices are NAV related.
What is Sales Load?
Is a charge collected by a scheme when it sells the units. Also called, 'Front-end' load. Schemes that do not charge a load are called 'No Load' schemes.
What is Repurchase or ‘Back-end’ Load?
Is a charge collected by a scheme when it buys back the units from the unit holders.
What are the risk factors for investing in Mutual Funds? 
Investment in mutual fund Units involves investment risks such as trading volumes, settlement risk, liquidity risk, default risk, including the possible loss of principal.

As the price / value / interest rates of the securities in which the Scheme invest fluctuates, the value of investors’ investments in the Schemes may go up or down. In addition to the factors that affect the value of individual securities, the NAV of the Schemes can be expected to fluctuate with movements in the broader equity and bond markets and may be influenced by factors affecting capital markets in general, such as, but not limited to, changes in interest rates, currency exchange rates, changes in governmental policies, taxation, political, economic or other developments and increased volatility in the stock and bond markets.

Past performance of the Sponsor/AMC/Mutual Fund does not guarantee future performance of the Schemes.

The names of the Schemes do not in any manner indicate either the quality of the Schemes or its future prospects and returns.

The Sponsors are not responsible or liable for any loss resulting from the operation of the Schemes beyond the initial contribution of Rs. 1 lakh made by them towards setting up the Mutual Fund. The Schemes are not guaranteed or assured return Schemes.
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