Best Mode forLay man to invest in stocks and bonds
A mutual fund is not an alternative investment option to stocks and bonds, rather it assembles the money of several investors and invests the same in stocks, bonds, money market instruments and other types of securities.Buying a mutual fund is like buying a small part of a big game. The owner of a mutual fund unit gets a proportional share of the mutual fund gain or loss.
Every mutual fund has a specific objective
The fund’s objective is laid out in the fund's prospectus, which is the legal document that contains information about the fund, its history,its track record and past performances, its officers .
Most Common objectives of a mutual fund are -
What the fund will invest in
Equity (Growth) meaning only in stocks
Debt (Income) Only in fixed income securities
Money Market (including Gilt) In short-term money market instruments (including government securities) BalancedPartly in stocks and partly in fixed-income securities,in order to maintain a 'balance' in returns and risk
Managed by an asset management Company referred as AMC
The company that puts together a mutual fund is called an AMC. An AMC may have several mutual fund schemes with similar or varied investment objectives.The AMC hires a professional money manager, who buys and sells securities in line with the fund's stated objective.
All AMCs Regulated by SEBI, Funds governed by Board of Directors
The Securities and Exchange Board of India (SEBI) mutual fund regulations require that the fund’s objectives are clearly mentioned in the prospectus.Also every mutual fund has a board of directors that is supposed to represent the shareholders' interests rather than the AMC’s.