A mutual fund is essentially a common pool of money in which investors put in their contribution. This collective amount is then invested according to the investment objective of the fund. The money could be invested in stocks, bonds, money market instruments, gold and other similar assets. These funds are operated by professional fund managers who invest in line with the aim to create growth or appreciation of the amount for investors.
Money pooled from various individuals (investors)
Well-regulated (by SEBI)
Access to large portfolios
Every rupee is Professionally Managed
Higher returns than conventional investing
Allows investing in small amounts
A mutual fund is set up in the form of a trust, which has a sponsor, trustees, Asset Management Company (AMC) and custodian.
Trust: is established by a sponsor who is like the promoter of a company.
Trustees: of the mutual fund hold its property for the benefit of the unit holders. The trustees are vested with the general power of superintendence and direction over the AMC. They monitor the performance and compliance with SEBI Regulations.
AMC: Asset Management Company which are also referred to as the Mutual Fund company. AMC employs professional fund managers, having expertise in investing in equity, debt or both, who then invest the collected amount from investors and manage it on their behalf.
Custodian: is registered with the Securities and Exchange Board of India (SEBI) who holds the securities of various schemes of the fund in its custody.
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