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The Tax Publishers Investment in Mutual Funds and Equity Linked Saving Schemes 1. Introduction Mutual Fund is a pool of money collected from many persons and invested in tradable securities. The gains or losses arising out of such investments are distributed among the investors of the fund in proportion to their investments. A Mutual Fund is in a way an agent of the investors on behalf of whom it manages their funds to raise the returns and minimise the risks. Due to availability of large corpus, Mutual Funds diversify their investments through a careful selection of securities amongst several sectors of industries, companies and products. Such sort of selection is beyond the capacity of an individual investor. A mutual fund can effectively divide its investments across various sectors of the economy and amongst products of several companies. Even if one or two companies are not doing well the mutual fund would not suffer huge losses because it would have earned more profits through other companies. Similarly well managed mutual funds may have the expertise, time and resources, required, for selection of securities for the sake of investment. Thus, investing through mutual fund is convenient as also it is more beneficial. All investments carry risks, specially equity investments bear larger risks as their returns are more volatile and uncertain. To minimise the risk exposure, one should invest funds in several instruments which is not possible when investing directly with limited resources. Mutual funds, on the contrary, enjoys the economies of large-scale operations and thus spread the costs of portfolio management across the various schemes. 2. Schemes of mutual funds A number of schemes have been floated by mutual funds in India. Now-a-days almost all the schemes have to be open-ended except fixed maturity plans. Where units are subject to regular repurchase with no fixed tenure, the scheme will be an open-ended scheme. These are funds in which one can invest at any time and can also withdraw at any time. Open ended funds do not have a fixed period of maturity. All the transactions of deposits and withdrawals are made at Net Asset Value (NAV) based prices. When money is deposited, a credit will get in the account for the money deposited being converted into a number of units at the prevailing purchase price. Similarly, when money is withdrawn the account will be debited with the amount withdrawn duly converted into a number of units at the effective sale price. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers

Investment in Mutual Funds and Equity Linked Saving Schemes

Mutual Fund is a pool of money collected from many persons and invested in tradable securities. The gains or losses arising out of such investments are distributed among the investors of the fund in proportion to their investments. A Mutual Fund is in a way an agent of the investors on behalf of whom it manages their funds to raise the returns and minimise the risks. Due to availability of large corpus, Mutual Funds diversify their investments through a careful selection of securities amongst several sectors of industries, companies and products. Such sort of selection is beyond the capacity of an individual investor. A mutual fund can effectively divide its investments across various sectors of the economy and amongst products of several companies. Even if one or two companies are not doing well the mutual fund would not suffer huge losses because it would have earned more profits through other companies. Similarly well managed mutual funds may have the expertise, time and resources, required, for selection of securities for the sake of investment. Thus, investing through mutual fund is convenient as also it is more beneficial. All investments carry risks, specially equity investments bear larger risks as their returns are more volatile and uncertain. To minimise the risk exposure, one should invest funds in several instruments which is not possible when investing directly with limited resources. Mutual funds, on the contrary, enjoys the economies of large-scale operations and thus spread the costs of portfolio management across the various schemes.

2. Schemes of mutual funds

A number of schemes have been floated by mutual funds in India. Now-a-days almost all the schemes have to be open-ended except fixed maturity plans.

Where units are subject to regular repurchase with no fixed tenure, the scheme will be an open-ended scheme. These are funds in which one can invest at any time and can also withdraw at any time. Open ended funds do not have a fixed period of maturity. All the transactions of deposits and withdrawals are made at Net Asset Value (NAV) based prices. When money is deposited, a credit will get in the account for the money deposited being converted into a number of units at the prevailing purchase price. Similarly, when money is withdrawn the account will be debited with the amount withdrawn duly converted into a number of units at the effective sale price.