All investments carry risk in some form or the other. Risk, liquidity and return are the so-called factors, which are considered before making an investment. But there is a trade off between risk and return. Lower the risk and lower the return. The decision of which mode of investment to choose largely depends upon the investors necessity and the factors which according to him is the most vital one.
People with more security concern choose fixed investment and investments in government securities and various post office savings. The main reason for choosing such an investment mode is that the amount invested in the above stated securities seems to be very secure and hence they seemed to be more preferred one where security is the prime concern.
People whom returns are most important are ready to take risk to earn fairer risk. The preferred mode of investment over here is shares and mutual fund. The risk factor in these modes of investment is basically the returns are basically performance based. If the company performs well the investors can accept fairer returns but if the company fails to perform then there can be a threat to the invested amount. Hence the returns are very volatile with the changes in the market conditions.
Hence it is up to the investors to decide upon the best kind of investment that would cater to his need. The hypothesis of the study was Investors still prefer the traditional funds for investment instead the more modern methods like mutual fund.
[...] Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. The flow chart below describes broadly the working of a Mutual Fund. ORGANIZATION OF A MUTUAL FUND There are many entities involved and the diagram below illustrates the organizational set up of a mutual fund. The Fund Sponsor: “Sponsor″ is defined under SEBI regulations as any person who, acting alone or in combination with another body corporate, establishes a mutual fund. [...]
[...] Index Fund Index Funds replicate the portfolio of a particular index such as the BSE Sensitive index, S&P NSE 50 index (Nifty), etc these schemes invest in the securities in the same weight age comprising of an index. NAVs of such schemes would rise or fall in accordance with the rise or fall in the index, though not exactly by the same percentage due to some factors known as “tracking error” in technical terms. Necessary disclosures in this regard are made in the offer document of the mutual fund scheme. [...]
[...] If the mutual fund investment is sold after 365 days from the date of purchase, any capital gain made during that period will be treated as a long-term capital gain. Tax on long-term capital gains is computed as follows: Step Compute Capital gains with indexation Sale Proceeds xxx Less: Indexed Cost of Acquisition xxx Long-term Capital Gains xxx Tax payable will be 20% of capital gains as compute above Formula for calculation of indexed cost of acquisition Cost of acquisition X Cost inflation index for the year in Cost inflation index for the year in which asset is transferred Which asset is acquired? [...]
[...] Maintain necessary infrastructure to support the AMCs in maintaining high service standards to investors, and ensure that critical operations such as forwarding forms and Cheque to AMCs/registrars and dispatch of statement of account and redemption Cheque to investors are done within the time frame prescribed in the offer document and SEBI Mutual Fund Regulations. Avoid colluding with clients in faulty business practices such as bouncing Cheque, wrong claiming of dividend/redemption Cheque, etc. ROLE OF AN AGENT As a Mutual Fund agent, you are an advisor representing the interests of your clients as well as the Mutual Fund organizations you represent. [...]
[...] Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed portfolio at a relatively low cost. Anybody with an ingestible surplus of as little as a few thousand rupees can invest in Mutual Fund. Each mutual fund scheme has a defined investment objective and strategy. A mutual fund is the ideal investment vehicle for today's complex and modern financial scenario. Markets for equity shares, bonds and other fixed income instruments, real estate, derivatives and other assets have become mature and information driven. [...]
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