Mutual Funds

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Mutual funds can be defined as the money-managing systems that are introduced to professionally invest money collected from the public. The Asset Management Companies (AMCs) manage different types of mutual fund schemes. The AMCs are supported by various financial institutions or companies.

Investment in mutual funds in India means pooling money in bonds, short-term money market, financial institutions, stocks and securities and dishing out returns as dividends. In India, Fund Managers manage the mutual funds. They are also referred to as portfolio managers. The mutual funds in India are regulated by the Securities Exchange Board of India.

Types of Mutual Funds

Mutual funds have different structure and aims, which in turn enable us to classify them into various major categories. These categories are:
  • Closed-end mutual funds
  • Open end funds
  • Equity mutual funds
  • Mid cap funds
  • Large cap funds
  • Growth funds
  • Balanced funds
  • Exchange Traded Funds (ETFs)
  • Load mutual funds and No-Load mutual funds
  • Value funds
  • International mutual funds
  • Money market funds
  • Sector mutual funds
  • Fund of funds (FoF)
  • Index funds
  • Regional mutual funds

Benefits of Mutual Funds

Mutual funds are preferred for their cost-effectiveness and easy investment process. By investing all the money in a mutual fund, investors can buy stocks or bonds at lower trading charges. This is indeed one of the main benefits, which is not available otherwise. You don't need to see which stock or bond would be better to buy. Another advantage is diversification. Diversification stands for diffusing money across various different categories of investments. There is every possibility that when one investment is down, the other can be up. In simple terms, this is helpful in reducing risks.

Transparency, flexibility, professional investment management, variety and liquidity are some of the other benefits of the mutual funds, which are not found in case of other investments to such an extent.

Risk versus Reward

Volatility in the market activity can be referred to as the risk in the mutual fund investment. The sudden upward and downward sentiments of the markets and individual issues can be attributed to several key factors. These factors comprise:
  • Inflation
  • Interest rate changes
  • General economic scenario
The aforementioned factors are the main cause of worry amongst the investors. Most of the investors fear that the value of the stock they have invested will fall considerably. However, it is here one can notice its reward angle. It is this element of volatility that can also bring them substantial long-term return in comparison to a savings account.

List of Mutual Fund Companies in India

Some of the popular firms that deal in mutual funds in India are:
  • Reliance Mutual Funds
  • HDFC
  • ABN Amro
  • AIG
  • Bank of Baroda
  • Canara Bank
  • Birla Sun Life
  • DSP Merrill Lynch
  • DBS Chola Mandalam AMC
  • Escorts Mutual
  • Deutsche Bank
  • ING
  • HSBC
  • ICICI Prudential
  • LIC
  • JP Morgan
  • Kotak Mahindra
  • Lotus India
  • JM Financial
  • Morgan Stanley
  • State Bank of India (SBI)
  • Sahara Mutual Funds
  • Sundaram BNP Paribas
  • Taurus Mutual Funds
  • Tata
  • UTI
  • Standard Chartered

Best Mutual Funds in India

Before knowing about the arguably best mutual funds in India, it is important to know the factors that actually decide their fate in the market.

In order to get an actual ideal of the best performing mutual funds in the market, one needs to track its current Net Asset Value or NAV. NAV stands for the latest market value of the holdings of a fund that brings down the fund's liabilities, which are generally indicated in terms of per share amount. On a daily basis, most of the funds' NAV is decided. This is determined after the trade closes on certain financial exchanges. The net asset value of the mutual funds is ascertained at the end of the trading day. An increase in NAV signifies rise in the holdings of the shareholder. The Fund Firm will then do the transaction on the shares along with the sales fees. While open-ended net asset value of the mutual funds is issued daily, the close-ended NAV of the mutual fund is released on a weekly basis.

You can calculate net asset value of the mutual fund easily. Track the latest market value of the net assets of the fund and then subtract that by the number of outstanding shares.

Top mutual funds in India

Here are some of the top mutual funds in India that are listed below :
  • Reliance Mutual Fund
  • The DSP ML Tiger Fund
  • SBI Magnum Contra Fund
  • HDFC Equity Fund
  • Prudential ICICI Dynamic Fund
  • SBI Mutual Fund
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