A mutual fund is an investment mechanism that collects a pool of money from investors, called unit holders, who have the same investment objective. Mutual funds investments are managed and operated by professional fund managers, who then invest this pool into financial instruments across a spectrum of stocks, bonds, money market instruments, debt instruments, or into a hybrid arrangement.
In India, mutual funds are regulated by the Securities and Exchange Board of India (SEBI). This also ensures there’s an added layer of regulatory safeguard for the investor’s interests. Mutual funds are considered an ideal investment vehicle for those who do not have the expertise to invest directly in stocks. So the arrangement under a mutual fund works for you-you simply invest in a fund, and the fund manager will do the job of picking the stocks that he thinks will yield good returns, and you can reap benefits in accordance with the magnitude of risk you are willing to take. Expert Fund Managers of the mutual fund analyze all options based on experience & research, and this feature makes mutual funds that much more convenient as an investment vehicle.
Mutual funds invest across various sectors, companies and this diversification is actually one of the major benefits of mutual funds investments. What also adds to this convenience is that mutual funds are available in units of a large corpus, such that even a small investor can benefit from its investment strategy. On top of it, each investor benefits from scale in brokerage, management, custodial and other fees. It also implies that the risk is also spread across all the investors in mutual funds.
There are a few mutual funds that are worth mentioning, because of their unusual focus area:
UTI Transportation and Logistics Fund:
The fund had about 71 per cent exposure to the automobile sector in August and is volatile due to its sensitivity to interest rates. It is for investors with a high-risk appetite, say experts.
This mutual fund is a sector-oriented portfolio. It’s the only fund which focuses on auto and auto ancillary sector. Thus, it predominantly invests in stocks of companies engaged in the transportation & logistics sector in the design, manufacture, distribution or sale of transportation component/ services. Five-year returns from this fund, as of May 31, 2019, were at 11.65%.
Because of how focused this fund is on one sector, it would be agnostic to market capitalization and may take concentrated exposure to certain stocks or sectors.
SBI Magnum Comma:
SBI Magnum Comma Fund aims to provide investors with opportunities for growth along with the possibility of consistent returns by investing predominantly in a portfolio of stocks of companies engaged in the commodity and commodity-related businesses. The fund can also invest in companies that provide inputs to commodity companies – it as the flexibility for up to 20% of the stock. This open-ended Equity Scheme investing in commodity and commodity-related sectors was launched in August 2005.
Sundaram Rural and Consumption Fund:
The fund invests in companies with a focus on rural areas and rural prosperity. These include FMCG, fertilizer, chemical and automobile companies. This fund is suitable for investors who are seeking consistent long-term returns by investing predominantly in equity & equity related instruments of companies that are focusing on Rural India. The rationale was that these sectors are undergoing structural transformation and are expected to drive growth over the next decade. Under the scheme, your principal will be at moderately high risk.
Whether unusual or not, mutual funds investments are a great way to invest in the market and feed into your wealth creation objectives when you don’t feel confident making a direct investment. Top-rated mutual funds, managed by experienced fund managers, will help you realise your dream.
If you choose to invest in mutual funds via Finserv MARKETS, setting up an account is extremely simple. All you need to do is submit your KYC documents and fill the form on the website. You can open an account within seconds with just a few clicks. You also get access to financial planning tips and investment advice, and detailed portfolio summaries and insights into the performance of your investments. In open-ended schemes, you have the option of withdrawing or redeeming your money at any point of time at the current NAV, so mutual fund investments are also highly liquid.
Mutual fund investments are made according to your risk profile or risk appetite, so you can choose between equity funds, debt funds or choose to go hybrid! Finserv MARKETS also provide exclusive offers based on your risk profile and your investment goals.
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