My Notes

Mutual Fund → A Mutual fund is a pool of money collected from various investors and invest in capital market instruments such as shares, Bonds & govt. securities. It is managed by professional fund managers. The income earned through these investment is shared by its unit holders in proportion to the number of units owned by them.

NAV →It is the price at which unit of MF are bought & sold. It is a fund’s market value per unit. It is calculated on daily basis.

NAV = Value of Cash & Securities in fund portfolio - liabilities
———————————————
outstanding shares

Regulator → SEBI, (RBI, Companies Act, stock exchange, Min. of fin)

DisAdvantages of MF → Cost, price uncertainty (EOD NAV), past performance

AMC → It is a business face of the MF, as it manages all affairs of MF.

Re purchase Price → price at which close ended schemes repurchase its units that are trading in secondary market.

Redemption price → Price received by investor on selling units of MF schemes. It is usually equals to current NAV.

NFO → It is the first time subscription offers for a new scheme launched by AMC. It is similar to IPO of equity shares.

Types of MF →
Based on Flexibility → open ended / close ended / Interval Fund
Based on Asset classes → Equity / Debt / Hybrid

open ended → These funds buys & sell units on a continuous basis, hence allow investors to enter & exit the fund as per their convenience. The units are bought & sell at current NAV.

close ended → A close ended fund can sell fixed numbers of units only during its NFO period. It has a fixed maturity period. After NFO, it will be traded from stock exchanges only. Price determined by demand & supply.

Interval Funds → It combines features of open & close ended funds. It is largely close ended, but become open ended when fund Mgmt Co. offers to repurchase from existing unit holders during this interval.

Equity funds → It invest most of its corpus in equities. It is high risk, high return due to exposure to equity market.

small, mid, large cap
sector funds
index funds
Equity linked saving scheme (ELSS)

Debt fund → It invest in debt market instruments like Bonds, Debentures & govt. securities. It is generally preferred for regular interest income.

Gilt fund → Invest only in govt. securities for more than 1 year.
corporate Bond → Invest in corporate Co’s. high interest rate

Hybrid funds → It invest in combination of equity, debt & Gold. Gains high return from equity backed by safe return from Debt.

ETF → These are open ended funds, where units are traded on Stock exchange. The Price of units are determined by underlying index or Assets. It can be bought & sold at any time on Stock exchange at real time prices unlike NAV @ close of day.

FOF → Funds of funds, it invest either in other MF belonging to same fund house or belonging to other fund houses.

MF payout option

Growth option → The income received from dividend is re-invested in the scheme. It is suitable for investors who do not require interim cash flows.

Dividend option → In this option, payout is made to investors from time to time. It gives regular income to investors

SIP → SIP is a systematic way of investing money in MF, either monthly, quarterly or yearly. SIP gives the benefit of compounding.

SWP → SWP is reverse of SIP, It invested in lumpsum, SWP allows to withdraw regularly from the fund.

STP → Systematic Transfer plan is an automated way of moving money from one MF to another.

DTP → Dividend transfer plan Dividend earned transferred to another scheme of same MF.

Hedge fund →
a) In MF even small investors can invest but in Hedge fund only HNI’s, Banks, Insurance Co’s can invest.
b) In MF fund managers are allowed to only long the position but hedge fund managers can go long or short & earn good returns.
c) MF charges fixed percentage of AUM as fee but HF will charge performance fee along with regular fee.

Corpus → The Fund generated & kept for the existence and Sustenance of the organisation.

Jobbers → Jobers held shares in their own account and help boost market liquidity by matching investors buy and sell orders through their brokers.

Alpha = Actual Returns - Benchmark Returns