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A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is invested by the fund manager in different types of securities depending upon the objective of the scheme. These could range from shares to debentures to money market instruments. The income earned through these investments and the capital appreciation realized by the scheme are shared by its unit holders in proportion to the number of units owned by them (pro rata).

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 inventible surplus of as little as a few thousand rupees can invest in Mutual Funds. 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. Price changes in these assets are driven by global events occurring in faraway places. A typical individual is unlikely to have the knowledge, skills, inclination and time to keep track of events, understand their implications and act speedily. An individual also finds it difficult to keep track of ownership of his assets, investments, brokerage dues and bank transactions etc.

A mutual fund is the answer to all these situations. It appoints professionally qualified and experienced staff that manages each of these functions on a full time basis. The large pool of money collected in the fund allows it to hire such staff at a very low cost to each investor. In effect, the mutual fund vehicle exploits economies of scale in all three areas – research, investments and transaction processing.

If taking high risks by investing huge amounts in shares and stocks and spending sleepless nights over the rise and fall of the sensex is not your cup of tea you’d rather take the mutual fund route. Wondering what mutual funds are all about?

Mutual fund is one of the safer investment options available through which you can invest in equities. This is because mutual fund companies invest huge amounts in stocks in addition to several other considering the high returns. This is with a view to spread the risk and accordingly gain much more. With a huge number of investors pooling in money a single individual’s risk is limited.

While the returns from mutual funds are not comparable with those you receive on investment in equities, mutual funds offer you the security that shares don’t. Also with professional fund managers managing your money you can rest assured that your money is in safe hands and will only yield more or less depending on the management expertise of the company as also the market rate of investments.

Mutual funds companies offer different types of funds for investment. The focus of each of the fund types differ and depending on individual choices investments can be made by you in open ended, close ended, sectoral, equity, growth, index, debt funds among others.

Check out which of the funds suits your requirements.

There are umpteen mutual fund advisors around and how would you know who is reliable? Wait a minute.

To make things easier for you the Securities Exchange Board of India (SEBI) and the Association of Mutual Funds of India (AMFI) have come out with a mandatory examination and certification system that aims at promoting best practices and ethical standards in the business of sale of mutual fund.

SEBI has made it mandatory for all agents/distributors to obtain AMFI certification prior to appointment.

And AMFI Certified Intermediaries engaged in marketing and selling of mutual fund schemes are required to be registered with AMFI after passing the necessary AMFI certification Test. After which a unique ARN photo identity card is issued.

So your mutual fund advisor must be AMFI certified and registered holding an ARN identity card.

If you think these cards can be forged, something that is quite common these days you could call up the mutual fund office to check out.

Alternatively you could even log on to the AMFI website which lists details of its dealers/agents with their ARN numbers.

An intermediary not registered with AMFI is not an authorised mutual fund agent and cannot be paid brokerage as per AMFI rules.

Planning to buy or sell off mutual fund units and confused about the pricing or the NAV that will be applicable? Not to worry.

The Securities and Exchange Board of India (SEBI) keeping in mind consumer interest has come out with cut-off timings that can make things easier for you. Check out the following:

If you are planning to purchase units and if it is through a local cheque the cut-off timing is 3 pm which means you can be sure to get the NAV of the same day.

If the mutual fund office receives your cheque after 3.p.m note that the NAV of the next day will be applicable.

Also your application for purchase or redemption of units should be stamped on the back as well as on the face of it with the date, the serial number and the timing clearly mentioned.

In case yours is an outstation cheque and not payable at par at the place where it is received the closing NAV of the day on which the cheque is credited shall be applicable.

Also any loss in NAV due to delays caused will have to be made good by the AMC states SEBI and this is applicable to redemptions also.

In case of purchase of liquid schemes the cut off timing applicable shall be the closing NAV of the day immediately previous to the day on which funds are available for utilisation by the fund. If the AMC receives the application after 1 p.m. the NAV of the same day shall be applicable.

Similarly in case of redemption of liquid schemes, valid applications received up to 10:00 am, the previous day�s closing NAV shall be applicable and for valid applications received after 10:00 am, the same day�s closing NAV shall be applicable.

Besides mutual fund companies will soon have to state the average assets under management in their monthly reports as also the total number of investors

The service tax issue looms large on the mutual fund industry. And who will have to finally pick up the tab?

A solution to the same is yet to be worked out because the question of who is actually the beneficiary in this case � whether it is the asset management company or the investor remains to be decided.

As of now reports state that asset management companies (AMCs) have decided to fork out a lumpsum towards service tax. And that the mutual fund investor will not be burdened with an added cost.

But the matter does not end there. At some point will not AMCs consider passing on the said cost to investors?

Even otherwise, the expenses on funds are quite high and any further hike may act as a discouragement to investors choosing mutual funds to park their funds.

The Securities and Exchange Board of India (SEBI) has laid down limits on the expenses that a fund can charge.

The total recurring expense that can be charged to the scheme is 2.5 percent for the first Rs 100 crore mobilised, 2 percent and 1.75 percent for subsequent mop-ups in an equity scheme.

To add to it there are damaging reports about fund houses violating the norms laid down by SEBI by following unethical practices. Such instances can only mar investor trust and push individuals to switch over to other investment avenues for good.

As per the norms laid down by SEBI the total expenses of a scheme, excluding issue or redemption charges, should be not more than 2.5 percent of the average weekly net assets.

This leaves little scope for further additions. In such a situation, perhaps all that can be done is to squeeze in the service tax component from within the annual expenses. But will mutual funds agree to that one?

Who wouldn’t want to earn few bucks more through stock market investments but give a thought to the high risk it entails and one would have to think more than twice of taking the plunge.

Fret not. If equities are your forte how about taking the mutual fund route?

The ups and downs of the stock market can leave you poorer not to mention the mental anguish that could follow on losing your hard earned money reason why most small investors prefer the mutual fund route to stock market investing.

Mutual funds offer several avenues to park funds even for those with not-so-deep pockets and the best part is, the risk is limited.

But if you are looking for stock market related returns and you thought you could invest in equity diversified funds and rest assured, think twice.

In March, the BSE sensex delivered 70.48% returns during a years time and the equity diversified category gave 106.02% return over a one year period – highest in the mutual fund category. When compared with other fund types the equity diversified schemes are said to have outperformed every other. Comparatively the debt funds, considered to be more safe faced high volatility and performed poorly.

No doubt the mutual fund route spreads the risk inherent in direct investment in stocks but consider the performance of equity funds during the recent past.

The equity-diversified category delivered a negative return and equity funds that invested mainly in the FMCF category also delivered a negative return of 8.27 percent. In other words, investors shifted their preference from debt to equity. But this is not to scare you from investing in equities.

Being highly volatile in nature equity funds are definitely a high risk category. But you can be happy that you are playing safe with minimum risk

What if you had coconuts, pepper, soya etc as investment options? Never heard before? Well times-are a changing and soon apart from the usual investments you make be it in a range of diversified mutual funds, debts, bonds or money market instruments, picking from a range of investment options in commodities, real estate, gold etc may be before you soon.

Commodities futures as an investment option is expected to open up several avenues for the small investor. And investing in coconuts, soyabean and the like may not leave people with dropped jaws and raised eyebrows anymore here. Investment funds such copper fund, real estate fund, bullion fund etc are common in the USA. There are a number of commodity funds there be it copper fund, gold fund and the like.

But sadly in India these options remain to be explored. And there is no reason why it should not be introduced here say experts. While a few are skeptical about the success of such funds stating that designing the portfolio on commodities products are a different ball game altogether. And fund houses with lack of knowledge about commodities may not be able to do the right job. But again experts state that a commodities market consultant can be roped in.

To enable the introduction of commodities trading here the Association of Mutual Funds of India (AMFI) has already set up committees to look into the regulatory changes to be addressed as also the legal aspects. The AMFI chief believes that these new options will offer the necessary risk diversification as also higher returns. Plans are on the anvil to introduce schemes investing in commodity futures, with several new commodities exchanges like National Commodities and Derivatives Exchange (NCDEX) and National Multi Commodities Exchange (MCX).

Presently the Securities Act does not allow such a diversion but the day is not far feel experts when mutual funds will be investing in commodities, real estate, gold, copper and the like.

You may have strived hard towards creating a substantial saving for your family making the most of each investment option available be it shares, mutual funds, bank deposits, bonds or insurance.

But given a thought? What if God forbid something happened to you and your family is left clueless about who should receive how much of the total investment amount? What if these issues were reasons for major disputes in your family? To avoid such a situation it is in your interest to nominate the beneficiary before hand.

What is nomination: Nomination has legal standing. It is stating in writing who will receive the amount in question after your death. Though it is not compulsory it is in your interest to nominate to avoid future family disputes.

For that matter even your bank savings account, should have a nomination especially if the account is in a single name. If it is a joint account, with an either or survivor option the survivor of the two will receive the proceeds if anything unfortunate were to happen to the first account holder. In case of mutual funds, bonds etc through nomination you can be sure the desired individual will receive the money. Note that nomination is not a will in itself.

By nominating an individual you state that after your death the person nominated stands to receive the proceeds of be it mutual funds, bonds or any other investment avenue. In the absence of a nomination there will be more than one claimant and the legal hassles are many not to mention the time it could take after making you run from pillar to post and after all this the one who rightfully deserves may not receive the amount.

How to nominate: You can nominate another if you are over 18 years of age. Also you can change your nomination at any time. But you can nominate only one individual. If you have nominated more than one it is considered invalid.

How to claim the amount: To claim the proceeds you need to fill up the claim form and produce the death certificate of the individual.