Yash Consulatants

Mutual Fund Advisor (ARN No.38185)

 

 

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Open-Ended Schemes

 

An open-end fund issues and redeems shares on demand, whenever investors put money into the fund or take it out. This happens routinely every day and the total assets of the fund grow and shrink as money flows in and out. That means the more investors buy the BSE 500 Index fund, for instance, the more shares there will be. There's no limit to the number of shares the fund can issue. Nor is the value of each individual share affected by the number outstanding, since net asset value (NAV) is determined solely by the change in prices of the stocks or bonds the fund owns, not the size of the fund itself.

 


Close-Ended Schemes

Schemes that have a stipulated maturity period (ranging from 2 to 15 years) are called close-ended schemes. You can invest directly in the scheme at the time of the initial issue and thereafter you can buy or sell the units of the scheme on the stock exchanges where they are listed. The market price at the stock exchange could vary from the scheme's NAV on account of demand and supply situation, unit holders' expectations and other market factors. One of the characteristics of the close-ended schemes is that they are generally traded at a discount to NAV; but closer to maturity, the discount narrows.

Some close-ended schemes give you an additional option of selling your units directly to the Mutual Fund through periodic repurchase at NAV related prices SEBI regulations ensure that at least one of the two exit routes are provided to the investor.


Growth Schemes


Aim to provide capital appreciation over the medium to long term. These schemes normally invest a majority of their funds in equities and are willing to bear short-term decline in value for possible future appreciation.

These Schemes are not for investors seeking regular income or needing their money back in the short-term

  • Investors in their prime earning years.
  • Investors seeking growth over the long-term.
 

Income Schemes

 

Aim to provide regular and steady income to investors. These schemes generally invest in fixed income securities such as bonds and corporate debentures.

Capital appreciation in such schemes may be limited.

Ideal for

  • Retired people and others with a need for capital stability and regular income.
  • Investors who need some income to supplement their earnings.


Balance Schemes

 

Aim to provide both growth and income by periodically distributing a part of the income and capital gains they earn. They invest in both shares and fixed income securities in the proportion indicated in their offer documents. In a rising stock market, the NAV of these schemes may not normally keep pace, or fall equally when the market falls.

Ideal for

  • Investors looking for a combination of income and moderate growth.


Money Market Schemes

 

Aim to provide easy liquidity, preservation of capital and moderate income. These schemes generally invest in safer, short-term instruments, such as treasury bills certificates of deposit, commercial paper and inter bank call money. Return on these schemes may fluctuate, depending upon the interest rates prevailing in the market.

Ideal for

  • Corporate and individual investors as a means to park their surplus funds for short periods or awaiting a more favourable investment alternative.
 

Tax Saving Schemes

 

These Schemes offer tax rebates to the investors under tax laws as prescribed from time to time. This is made possible because the Government offers tax incentives for investment in specified avenues. For example, Equity Linked Savings Schemes (ELSS) and Pension Schemes.

Recent amendments to the Income Tax Act provide further opportunities to investors to save capital gains by investing in Mutual Funds. The details of such tax savings are provided in the relevant offer documents.

Ideal for

Investors seeking tax rebates.

 

 

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