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- The main objectives of Mutual Funds are to provide an opportunity to the small investor to acquire property in the form of shares without much difficulty, and to manage investors' portfolio in a manner that provides regular income, growth, safety, liquidity and diversification.
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Portfolio Classification: Based on the security in which the funds are invested, the mutual funds are divided into bond funds, stock funds, income funds, money market funds, specialized funds, leveraged funds, balanced funds, growth funds, performance funds, specialty funds, dual purpose funds and real estate funds.
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Open-ended mutual funds and close-ended mutual funds come under the category of functional classification.
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Domestic mutual funds and offshore mutual funds come under the category of geographical classification.
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Net asset value is the difference between assets and liabilities of a mutual fund divided by the number of units outstanding.
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Mutual funds can be sponsored by either public or private limited companies. The sponsors will appoint the trustees and the funds managers or asset management company. A mutual fund is created by the sponsors under the Indian Trust Act.