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funds?
To identify the match between companys strategy to sell the mutual
funds and customers requirement.
To do a comparative analysis between Lump sum investments &
Systematic Investment plan.
To give recommendation to the company on the basis of study for future
course of action.
SPONSOR:
The sponsor is the promoter of mutual fund. It establishes the fund and registers
it with SEBI. The sponsor appoints the trustees, custodians and the AMC with
approval of SEBI, and in accordance with SEBI regulations. The sponsor is
required to contribute at least 40% of the minimum net worth (Rs. 10 crore) of
the asset management company. The sponsor executes the trust deeds in favor of
the trustees.
TRUSTEE:
The mutual fund needs to be constituted in the form of a trust and the
instrument of the trust should be in the form of a deed registered under the
provisions of the Indian Registration Act, 1908. If it is a company then it is also
subject to the Indian Companies Act. It is the responsibility of the trustee to
protect the right of the investors, whose fund is managed by the AMC. There
must be at least 4 members in the board of trustees and at least 2/3rd of the
members of the board of trustees must be independent. Trustees must furnish to
SEBI, on half yearly basis, a report on the activities of the AMC.
CUSTODIANS:
A custodian provides the following services to the mutual fund:
Post-trading and custodial services to the Mutual Fund.
Ensure that the benefits due on the holdings are received on time.
Detailed management information and other reports as required by the
AMC.
Maintain confidentiality of the transactions.
Be responsible for the loss or damage to the assets belonging to the
Scheme due to negligence on its part or on the part of its approved agents
and segregate assets of each Scheme.
REGISTRARS and TRANSFER AGENTS(R&T Agent):
The R&T agents are responsible for the investor servicing functions, as they
maintain the records of investor in mutual funds. R&T agents handle the
communications with investors, perform data entry services, and maintain
investor data and dispatches Account Statements reflecting the holding and
transactions of the investors.
LEGAL ADVISORS:
Legal advisors advise mutual funds on regulatory and taxation issues. Every
mutual fund has an employee designated as compliance officer, who work under
the advice of legal advisor.
Most funds have a particular strategy they focus on when investing. For
instance, some invest only in Blue Chip companies that are more established
and are relatively low risk. On the other hand, some focus on high-risk startup
companies that have the potential for double and triple digit growth. Finding a
mutual fund that fits your investment criteria and style is important.
and your rights exercised. It also uses the services of a high quality
custodian and registrar
Liquidity-In open-ended schemes, you can get your money back
promptly at net asset value related prices from the mutual fund itself.
When you buy or sell mutual funds, you are making multiple trades at multiple
prices. If you are trying to accomplish a particular investing goal with a mutual
fund, targeting a certain price through your transactions can get very complex.
Its not as easy as buying a simple asset like an exchange traded fund.
transactions High Fee Structure
In conjunction with the trading complexity of mutual funds come the associated
costs. Multiple trades translate into multiple commissions and management
fees. Not to mention the advisory fees. With an active mutual fund portfolio, the
investing costs can add up rather quickly.
Lack of Liquidity
Yes, there are a lot of different mutual funds in the investment world, but that
doesnt necessarily mean they are very liquid. With mutual funds, the final
transactions arent complete until the end of a trading day difficulties on days
when Tax Disadvantages
Mutual funds are not the most tax-friendly investment in the world. Capital gain
taxes are incurred as the shares within the mutual fund are traded during the life
of the investment.
Market Risk:
Credit Risk:
The debt servicing ability (may it be interest payments or repayment of
principal) of a company through its cash flows determines the Credit Risk faced
by you. This credit risk is measured by independent rating agencies like CRISIL
who rate companies and their paper. An AAA rating is considered the safest
whereas a D rating is considered poor credit quality. Credit risk is influenced
by both business cycles and firm specific events. Credit risk increases during
economic contractions and decreases during economic expansions. A welldiversified portfolio might help mitigate this risk.
Inflation Risk:
It reflects the changes in the purchasing power of the cash flows resulting from
the fixed income securities. Whenever inflation sprints forward faster than the
earnings on your investment, you run the risk that you'll actually be able to buy
less, not more. Inflation risk also occurs when prices rise faster than your
returns.
Political/Government Risk:
Changes in Government policy especially in regard to the tax benefits may
impact the business prospects of the companies leading to an impact on the
investments made by the fund. They can create a favorable environment for
investment or vice versa.
Liquidity Risk:
Liquidity risk arises when it becomes difficult to sell the securities that one has
purchased. Liquidity Risk can be partly mitigated by diversification, staggering
of maturities as well as internal risk controls that lean towards purchase of
liquid securities.