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    2 views4 pages

    fsm2

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    nivino1307

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    of 4

    What is Mutual Fund?

    A mutual fund is an investment vehicle where many investors pool their money
    to earn returns on their capital over a period. This corpus of funds is managed
    by an investment professional known as a fund manager or portfolio manager. It
    is his/her job to invest the corpus in different securities such as bonds, stocks,
    gold and other assets and seek to provide potential returns. The gains (or losses)
    on the investment are shared collectively by the investors in proportion to their
    contribution to the fund.

    The different types of mutual funds based on their asset classes are as
    follows:
    Equity funds: Equity funds mainly invest their assets in the shares of
    companies. As per the guidelines, an equity mutual fund scheme should invest
    at least 65% of its assets in equities or equity-related investments. The
    remaining funds are invested in other, more secure asset classes to offset the
    risk. The returns from these funds depend on the performance of the shares they
    invest.
    Equity funds can be again categorised in many ways, such as:
    Based on the way they are managed - active and passive funds.
    Based on the market capitalisation of the stocks they invest in - small-, mid-,
    multi-, and large-cap funds.
    Based on their geography - domestic and foreign funds. They can also be
    classified as broad-market, regional or single-country funds.
    Based on the sector they invest in - pharma, FMCG, real estate, etc.
    Equity funds are suitable for those who have long investment horizons.
    Furthermore, they have a track record of providing superior returns than other
    types of mutual funds, making them a solid option for building wealth.

    Debt funds: Debt funds invest their assets in fixed-income instruments, such as
    corporate/government bonds, T-bills, or certificates of deposits. Compared to
    equity funds, debt funds are less risky and have lower expense ratios. Moreover,
    they give better returns than traditional investment options like fixed deposits.
    Hence, they can be a better choice for those seeking regular income.
    Hybrid funds: Hybrid funds consist of both debt and equity components. This
    type of mutual fund is suitable for investors with a moderate risk appetite.
    Hybrid funds can be classified based on their asset allocation as follows:
    Conservative hybrid funds - invest at least 75% of the asset in debt and the rest
    in equity.
    Aggressive hybrid funds - invest 65% to 80% of the asset in equity or equity-
    related instruments and the remaining in money market and debt instruments.
    Dynamic asset allocation funds - invest in both debt and equity, and their
    proportion varies with the market condition.
    Multi-asset allocation funds - invest at least 10% of their money in at least 3
    asset classes, and the proportion changes with market conditions.
    Arbitrage funds - invest a minimum of 65% of their asset in equity and the rest
    in debt and money market instruments.
    Equity savings funds - invest at least 65% of their asset in equity and equity-
    related instruments and a minimum of 10% in debt instruments.
    Money market funds: Money market funds normally invest in low-risk, short-
    term securities such as T-bills, certificates of deposit, commercial paper, etc.
    They offer high liquidity; investors often invest in the funds as a short-term cash
    management tool.

    Types of Mutual Fund Schemes based on Portfolio Management:


    The classification of mutual funds based on portfolio management can be done
    as follows:

    Active funds: In active funds, the fund managers actively manage the portfolio
    by deciding which securities to buy and sell. These funds are designed to
    outperform a specific benchmark index or achieve higher returns through active
    management strategies.
    Passive funds: Passive funds are designed to replicate the performance of a
    particular market index. They aim to match the returns of the index they track
    instead of outperforming it. They are called 'passive' funds because they do not
    involve active stock selection or market timing strategies.
    Here are five prominent companies in India known for their mutual fund
    schemes and strong track record in asset management. I’ll also include some
    factors to consider in evaluating better companies for mutual fund investments.

    1. HDFC Asset Management Company (HDFC AMC):


    Popular Funds: HDFC Equity Fund, HDFC Top 100 Fund
    Strengths: Strong reputation, wide variety of funds, strong performance history
    in equity funds.
    Suggestion: Suitable for investors looking for consistent returns in large-cap and
    equity-oriented funds.

    2. SBI Mutual Fund:


    Popular Funds: SBI Bluechip Fund, SBI Magnum Midcap Fund
    Strengths: Backed by the State Bank of India, known for stability, good options
    in both equity and debt categories.
    Suggestion: Well-suited for conservative investors who seek stability along with
    moderate growth.

    3. ICICI Prudential Mutual Fund:


    Popular Funds: ICICI Prudential Bluechip Fund, ICICI Prudential Balanced
    Advantage Fund
    Strengths: Strong portfolio management, good options for hybrid funds, wide
    selection in both equity and debt.
    Suggestion: Ideal for investors interested in balanced or hybrid funds, offering
    flexibility across asset classes.

    4. Nippon India Mutual Fund (formerly Reliance Mutual Fund):


    Popular Funds: Nippon India Large Cap Fund, Nippon India Small Cap Fund
    Strengths: Known for small- and mid-cap funds, offering high growth potential.
    Suggestion: Suitable for investors willing to take on higher risk for potentally
    higher returns, particularly in small- and mid-cap funds.

    5. Axis Mutual Fund:


    Popular Funds: Axis Bluechip Fund, Axis Midcap Fund
    Strengths: Strong performance in large-cap and mid-cap categories, focus on
    growth.
    Suggestion: Good option for investors looking for a growth-oriented portfolio,
    particularly in equity mutual funds.

    Factors to Consider for Better Mutual Fund Companies:


    Consistency in Returns: Companies with a track record of stable returns over 5–
    10 years are generally more reliable.
     Expense Ratio: Lower expense ratios can enhance net asset value (NAV)
    growth over time.
     Risk Management: Look for funds with a strong focus on risk-adjusted
    returns.
     Portfolio Management Expertise: Companies with skilled fund managers
    can deliver better results across market conditions.
     Fund Variety: Companies offering a broad mix of equity, debt, and hybrid
    funds give investors more options based on goals and risk tolerance.

    These companies are well-established in India’s mutual fund sector, and their
    diverse schemes cater to different investment preferences.

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