INFLOWS INTO EQUITY, INCOME FUNDS SURGE
09, Apr 2019
Prelims level : Indian Economy Mains level : GS-III Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment
Why in news:
- Equity mutual fund schemes have seen a four-month decline in flows in March leading to a marginal increase in the overall assets of the fund industry in the last month of the financial year. Income funds also saw a huge jump in inflows for the month.
What are mutual funds?
- A mutual fund collects money from investors and invests the money on their behalf. It charges a small fee for managing the money.
- Mutual funds are an ideal investment vehicle for regular investors who do not know much about investing. Investors can choose a mutual fund scheme based on their financial goal and start investing to achieve the goal.
Types of Mutual Funds in India:
- The Securities and Exchange Board of India has categorised mutual fund in India under four broad categories:
- Equity Mutual Funds Debt Mutual Funds Hybrid Mutual Funds
- Solution-oriented Mutual Funds
Equity mutual fund scheme:
- These schemes invest directly in stocks.
- These schemes can give superior returns but can be risky in the short-term as their fortunes depend on how the stock market performs.
- Investors should look for a longer investment horizon of at least five to 10 years to invest in these schemes.
Debt mutual fund schemes:
- These schemes invest in debt securities. Investors should opt for debt schemes to achieve their short-term goals that are below five years. These schemes are safer than equity schemes and provide modest returns.
Hybrid mutual fund schemes:
- These schemes invest in a mix of equity and debt, and an investor must pick a scheme based on his/her risk appetite.
- These schemes are devised for particular solutions or goals like retirement and child’s
- education. These schemes have a mandatory lock-in period of five years.
Assets Under Management fund:
- Assets under management are the overall market value of assets/capital that a mutual fund holds. The fund manager manages these assets and takes investment decisions on behalf of investors. AUM is an indicator of the size and success of a fund house.