Mutual Funds In India

Mutual funds are money-managing institutions set up to professionally invest the money pooled in from the public. These schemes are managed by Asset Management Companies (AMC), which are sponsored by different financial institutions or companies.

Mutual Fund is an ideal investment vehicle where a number of investors come together to pool their money with common investment goal. Each Mutual Fund with different type of schemes is managed by respective Asset Management Company (AMC). An investor can invest his money in one or more schemes of Mutual Fund according to his choice and becomes the unit holder of the scheme. The invested money in a particular scheme of a Mutual Fund is then invested by fund manager in different types of suitable stock and securities, bonds and money market instruments. Each Mutual Fund is managed by qualified professional man, who use this money to create a portfolio which includes stock and shares, bonds, gilt, money-market instruments or combination of all. Thus Mutual Fund will diversify your portfolio over a variety of investment vehicles. Mutual Fund offers an investor to invest even a small amount of money.

Mutual Funds schemes are managed by respective Asset Management Companies sponsored by financial institutions, banks, private companies or international firms. The biggest Indian AMC is UTI while Alliance, Franklin Templeton etc are international AMC's.

Mutual Funds offers several benefits to an investor such as potential return, liquidity, transparency, income growth, good post tax return and reasonable safety. There are number of options available for an investor offered by a mutual fund.

Before investing in a Mutual Fund an investor must identify his needs and preferences. While selecting a Mutual Fund's schemes he should consider the effect of inflation rate, diversification of investment, the time period of investment and the risk factors. There are various type of risk factors as:

1. Market Risk

2. Credit Risk

3. Interest Rate Risk

4. Inflation Risk

5. Political Environment

CRISIL's composite performance ranking (CPR) measures the performance for each of the open-ended scheme of Mutual Fund. There are four parameters considered to measure the performance of a mutual fund such as Risk-adjusted returns of the scheme's NAV, Diversification of Portfolio, Liquidity and Asset Size.