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MK Finserve > Mutual Funds

Mutual Funds

Understanding Mutual Funds:

Stock Market is much talked about investment option for retails investors nowadays. But there is equally fear of losing money in stock market investments. A retail investor does not possess the knowledge of stock market but still may like to enjoy the benefits of stock market like higher return (return above inflation) Tax efficient investment, flexibility in investments and withdrawals and so on

Mutual Funds play an important role in being a bridge between the retails investors and the stock market. The investors have money and willingness to invest in stock market but restrained to do so because of the fear of losing money in stock market.

The Mutual Fund companies do have expertise in stock market investments, have fund managers capable of analyzing the stocks both technically and fundamentally and choosing the right stock at the right time so as to make good returns for their investors.

People often mistake mutual fund is also always a risky investment. It is not so. Mutual Funds have various categories of fund options: Equity Funds, Debt Funds, Balanced Funds, Liquid Funds.

Equity Funds are further categorized into Large Cap Funds, Mid Cap Funds, Small Cap Funds, Multi-Cap Funds, Tax Saving Funds, Thematic Funds and so on.

The money mobilized under large-cap funds are invested into large corporate companies stocks and should not be diverted to any other category of stocks. This is considered to be a stable fund.

The amount mobilized under Midcap and Small-cap funds are invested in the mid and small level companies stocks. These investments carry a little higher risk and the reward also will be higher.

The amount mobilized under Multicap funds will be invested across all levels of stocks. All these funds will be invested under the said category of stocks coming under various sectors like Pharma, IT, Banking, FMCG, Automobiles and so on

Thematic funds are sectoral funds. The money mobilized under a sector say Banking sector will be invested in banking stocks only. There are various sectoral funds like Banking, Infrastructure, FMCG, International, Pharma, Technology and so on.

Balanced funds (Hybrid Funds) are a mixture of Equity and Debt instruments. The balanced funds are further categorised in to Equity Oriented Balanced fund (with more than 65% equity exposure) and Debt oriented balanced fund (with more than 50% debt exposure) The Debt oriented balanced funds are further divided in to Debt oriented Hybrid fund – Aggressive and Debt oriented Hybrid fund – Conservative with the changes in the Equity / Debt ratio.

Mutual Funds also have debt funds and liquid funds. The debt funds are invested in debentures and bonds issued by Government and the corporates.

Liquid funds are invested in money market instruments and short-term and ultra-short term bonds.

The advantages of investing in Mutual Funds:

  • The ease of investment – No need for a Demat account. All KYC complied investors shall invest in mutual funds in any of the above categories of funds depending upon their risk-taking ability and willingness.
  • Fund Management expertise – An ordinary investor though do not have any stock market knowledge shall make use of the expertise of the fund managers expertise through various schemes by paying fund management fees.
  • Advantage of diversification – The amount invested in Mutual Fund schemes are used to invest in stocks of many companies across various sectors. The risk is spread across various companies of various sectors thereby reducing the risk of losing money in stock market.
  • Transparency – The investor can view the progress of his investments at all times and has the flexibility to come out of the fund showing poor performance.

The following funds may be considered for investments

Large Cap funds

  • JM Core 11
  • Birla SL Frontline Equity Fund
  • ICICI Focused Bluechip fund
  • SBI Bluechip fund
  • IDFC Focused Equity Fund

Multicap Funds

  • Aditya Birla SL Advantage Fund
  • DSP BR opportunities fund
  • Kotak Select Focus
  • Motilal Oswal most focused multicap
  • SBI Magnum Multicap

Midcap Funds

  • Aditya Birla SL Pure Value fund
  • Sundaram Select Midcap
  • HDFC Midcap opportunities fund
  • Mirae Asset Emerging Bluechip
  • L&T India Value Fund

Tax Saving Funds

  • Aditya Birla Tax Relief ‘96
  • DSP BR Tax Saver
  • IDFC Tax Advantage (ELSS)
  • Reliance Tax Saver
  • Tata India Tax Saver

Equity Oriented Hybrid Funds

  • HDFC Balanced Fund
  • Aditya Birla SL Balanced Fund ‘95
  • ICICI Balanced Fund
  • L&T India Prudence
  • Reliance regular savings balanced fund

Mutual Funds

  • Equity funds
  • Debt funds Balanced Funds
  • Income funds Liquid Funds
  • Large Cap Equity Oriented hybrid Funds
  • Mid-cap Debt Oriented hybrid funds
  • Small Cap Thematic fund