Thursday, August 20, 2020

Portfolio Management With Mutual Funds

 Mutual Fund is an investment option that everyone should invest in but despite an impressive growth in asset under management in recent years ,  a lot of work remains to be done in the industry.

While there are many factors that have been conducive to the overall growth in Asset under Management, one factor that hinders the growth is the lack of awareness about the mutual funds. There has been considerable work in this area and the aware campaign run by AMFI has been able to improve the level of awareness by quiet much.

But even if one is aware about mutual fund as an investment option  and convinced " Mutual Fund sahi hai, the real questions that begs the answe is " Kaunsa Sahi hai?" ( Which Scheme is okay for me?)

While understanding the concept of mutual funds is not a rocket science but selecting the right scheme suiting one's purpose is a humongous task owing to the fact that there are more than 1850 mutual fund schemes in India divided into equity, Debt , hybrid and other funds which inn all together have more than 32 sub categories as per the latest Categorization by SEBI.

Since the mutual fund invests in variety of asset classes like Equity, Debt, Gold, Derivatives among others the risk and return characteristics of these asset classes have a bearing on the overall risk and return characteristics of a mutual fund scheme.

So a prospective investor or a financial advisor who is advising clients on mutual funds needs to have a clear understanding of these factors when investing in the mutual funds. The inherent characteristics of mutual fund schemed must be looked in like risk return, Investment objective, turnover ratio also, at the same the the suitability has to be assessed from the client side perspective comparing the benefits of the mutual funds with clients requirements

So from one side we need to look at from the fund point of view that what are the factors that must be looked into and since mutual funds have different kind of schemes the parameters that need to be considered are also different, at the same time an investor or a financial advisor would do well to look at it from the financial goal perspective of the end consumer

Thus portfolio management with mutual fund entails a deep understanding in the discipline of personal finance, understanding of the technical terms, Continuous monitoring and updation of the MF Portfolio

Some of the documents that can help the investor owing to high level of transparency mandated by SEBI in mutual fund industry

1. Fund Fact Sheet- A monthly Voluntary Publication by most of the Asset Management Companies

2. Offer Documents- Scheme information document, statement of Additional information and Key information Memorandum 

but this literature of mutual funds would consist of a lot of technical term which you should acquaint yourself with before venturing out in the world of mutual funds.

Investing is a knowledge driven discipline and the focus should be on gaining proper knowledge before investing or advising

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