JAIIB – Principles –

UNIT 6:
Role & Functions Of Mutual Funds
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1. Mutual Fund: Is a Mechanism for pooling resources from Public by issuing
Units to them and investing the funds

2. Unit Holders: investor of mutual funds

3.. Mutual Fund ia required to be registered with SEBI, a mutual fund is set up
in the form of a trust, which has sponsors, trustee, Asset Management
Companies (AMC) and Customers

4. AMC approved by SBI

5. NAV [Net Asset value]" Performance of a particular Scheme of mutual

Fund.

6. NAV per unit is the Market Value of Securities of a Scheme.

7. NAV is required to be disclosed by Mutual Funds on a Regular Basis Daily or

Weekly
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8. Different Types of Mutual Fund Schemes:
(I) Open Ended Scheme/Plan's:
(i) Is available for the subscriptions & repurchase on a continous basis, these schemes does not have a fixed maturity
period.
(ii) NAV Prices declared on weekly basis.
(iii) Investors can conveniently buy and sell units regularly
(iv) Key feature of Open Ended Scheme /Plan is liquidity

(II) Close Ended Scheme/Plan: has a Fixed Maturity Period of 2 to 10 years. NAV disclosed on weekly basis.

(III) Growth Scheme/Equity Oriented Scheme:

(i) Aim to provide Capital Appreciation over Medium to Long Term Period.
(ii) Invest Major Part of Corpus Funds in Equities
(iii) Has higher Risk
(iv) Also provide Dividend Option , capital Appreciation

(IV)Income Scheme/Debt Oriented Scheme

(i) Aim is to provide Regular and Speedy Income To Investors.
(ii) Money invested in Fixed Income Securities such as Bonds, Corporate Debentures, Government Securities, Money
market Instruments
(iii) Less Risky
(iv) NAV not affected only effected if there is change in Interest Rates
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(V) Balanced Plan Scheme:
(i) Used to provide both Growth and Regular Income, invest in a proportion both in Equities and Fixed
Income, generally invest in 40%: 60%

(VI) Money Market/Liquid Fund Scheme:

(i) Are also called Income Funds and aim is to provide easy liquidity preservation of capital and to ensure
a moderate income.
(ii) These schemes invest exclusively in safer short term instrument such as T-Bills, CD [Certificate Of
Deposit], CP[Commercial Paper], Inter Bank Call Money, Government Securities

(VII) Gilt Fund: Invest exclusively in Government Securities, have No Default Risk

(VIII) Index Fund: Replicate the portfolio of a particular index such as BSE 30, NSE 50 index.

(IX) Sector Specific Funds: Funds/Schemes which invest in the securities of only sectors or industries as
specified like pharmaceutical, software, FMCG, Petrolieum

(X) Tax Saving Schemes: Offer Tax Rebates to investor under specific provision of Income Tax Act 1961.
Example ELSS [Equity Linked Saving Scheme], Pension Schemes

(XI) FoFs(Fund of Funds): Invests primarily in other schemes of the same or other Mutual Funds.
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9. Rajiv Gandhi Equity Saving Scheme [RGESS]: Is a New Tax Equity Tax Advantage Saving Scheme with the objective of encouraging the saving of small
investors in the Domestic Capital Market. It was introduced a new section 80 CCG as per Union budget 2012-13. Tax Benefit upto Rs 50000 whose
gross total annual income is less than or equal to Rs 12 lakhs.

10. New Fund Offer (NFO) Period: NFP should open for 15 days in case of Open Ended and Close Ended Schemes.

11. Product Labeling Mutual Fund:

(i) Blue: Principal at Low risk
(ii) Yellow: Principal at medium risk
(iii) Brown: Principal at High risk

12. SIP [Systematic investment plan]: Is not any Scheme but a way of spending money in mutual fund monthly /quarterly basis.

13. Number of Registered Insurers in India as on 30th September 2013

(a) Life Insurance : 1 [Public Sector] + 23 [Private Sector] = total 34
(b) General insurance: 6 [Public Sector] + 21 [private Sector] = Total 27
(c) Reinsurance: 1 [Public Sector] = Total 1

14: IRDA: in year 2000, IRDA was set up to regulate & develop the business of Insurance as per IRDA [Insurance Regulatory & development Authority], Act
1999

15. Types of Insurance Policies:

(i) Life
(ii) Health
(iii) Travel
(iv) Property
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16. Term life Insurance: Protection for limited period, terminates with no maturity value

17. Whole Life insurance: Provided Protection Over One's Entire Lifetime.

18. Endowment Scheme: Not only it pays life policy Face Amount in the event of the death of the
insured during a Fixed term Of Years, but also to pay the Full face Amount at the end of the term.

19. ULIP [Unit Linked investment Plan]: Offers a combination of Investment and protection and allow
insured the flexibility and choice on hoe/his premium are invested.
(i) ULIP performance depends on the fund performance
(ii) ULIP has varying degree of risk

20. Motor Insurance:

(i) Own Degree (OD Cover): (Liability Only Policy + damage to owners' vehicle). It covers Fire, Explosion,
Earthquake, flood, Storm, Cyclone, Land Slide)
(ii) 3rd party Liability (Comprehensive Package policy

21. Banc assurance: Selling of Insurance Products through Banks.

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