1. Professional Management — Investors may not have the time or the required knowledge and resources to conduct their research and purchase individual stocks or bonds. A mutual fund is managed by full-time, professional money managers who have the expertise, experience and resources to actively buy, sell, and monitor investments. A fund manager continuously monitors investments and rebalances the portfolio accordingly to meet the scheme’s objectives. Portfolio management by professional fund managers is one of the most important advantages of a mutual fund.
2. Risk Diversification — Buying shares in a mutual fund is an easy way to diversify your investments across many securities and asset categories such as equity, debt and gold, which helps in spreading the risk - so you won't have all your eggs in one basket. This proves to be beneficial when an underlying security of a given mutual fund scheme experiences market headwinds. With diversification, the risk associated with one asset class is countered by the others. Even if one investment in the portfolio decreases in value, other investments may not be impacted and may even increase in value. In other words, you don’t lose out on the entire value of your investment if a particular component of your portfolio goes through a turbulent period. Thus, risk diversification is one of the most prominent advantages of investing in mutual funds.
3. Affordability & Convenience (Invest Small Amounts) — For many investors, it could be more costly to directly purchase all of the individual securities held by a single mutual fund. By contrast, the minimum initial investments for most mutual funds are more affordable.
4. Liquidity — You can easily redeem (liquidate) units of open ended mutual fund schemes to meet your financial needs on any business day (when the stock markets and/or banks are open), so you have easy access to your money. Upon redemption, the redemption amount is credited in your bank account within one day to 3-4 days, depending upon the type of scheme e.g., in respect of Liquid Funds and Overnight Funds, the redemption amount is paid out the next business day.
However, please note that units of close-ended mutual fund schemes can be redeemed only on maturity. Likewise, units of ELSS have a 3-year lock-in period and can be liquidated only thereafter.
5. Low Cost — An important advantage of mutual funds is their low cost. Due to huge economies of scale, mutual funds schemes have a low expense ratio. Expense ratio represents the annual fund operating expenses of a scheme, expressed as a percentage of the fund’s daily net assets. Operating expenses of a scheme are administration, management, advertising related expenses, etc. The limits of expense ratio for various types of schemes has been specified under Regulation 52 of SEBI Mutual Fund Regulations, 1996.
6. Well-Regulated — Mutual Funds are regulated by the capital markets regulator, Securities and Exchange Board of India (SEBI) under SEBI (Mutual Funds) Regulations, 1996. SEBI has laid down stringent rules and regulations keeping investor protection, transparency with appropriate risk mitigation framework and fair valuation principles.
7. Tax Benefits —Investment in ELSS upto ₹1,50,000 qualifies for tax benefit under section 80C of the Income Tax Act, 1961. Mutual Fund investments when held for a longer term are tax efficient.
FAQs
The role of AMFI, inter-alia, is to (i) address the issues and challenges concerning the mutual fund industry to facilitate ease of doing business for its members, unitholders and various stakeholders; (ii) liaison / advocacy with the SEBI/ Reserve bank of India, Government of India etc.
Who is the CEO of Association of Mutual Funds in India? ›
Director at State Bank of India • New Chief Executive to focus on MF industry's growth aspects and AMFI 2.0 strategy. Mumbai, 8 Nov 2023: Association of Mutual Funds in India (AMFI) announced the appointment of its new Chief Executive, Mr. Venkat Nageswar Chalasani.
Who is the regulatory authority of mutual funds in India? ›
The correct answer is SEBI. Securities and Exchange Board of India is the regulatory authority of Mutual Funds in India. It has introduced several measures and policies to protect the interest of investors. SEBI (Mutual Funds) Regulations, 1996 have been issued to set uniform standards for mutual funds in India.
How many AMCs are there in India presently? ›
As of October 2023, there are 45 asset management companies of various sizes registered in India.
Who will control mutual funds in India? ›
The Securities and Exchange Board of India (SEBI) is the Regulator of Mutual Funds in India that protects investors and preserves transparency in the operation of mutual funds in India and the overall stock market. SEBI is responsible for ensuring that investors are protected.
Who regulates AMFI in India? ›
The fees charged by mutual funds are regulated and are subject to certain limits specified by the Securities and Exchange Board of India (SEBI). India has one of the highest savings rate globally.
How many associations of mutual funds are there in India? ›
The Association of Mutual Funds in India (AMFI) is an association of all the Asset Management Companies (AMCs) of SEBI registered mutual fund houses in India. AMFI was incorporated on 22nd August 1995 as a non-profit organization. As of December 2022, AMFI has 46 Asset Management Companies as its members.
Who is the most successful fund manager in India? ›
Top Fund Managers in India
| Fund Manager | Fund House | 5-Year Returns (%) |
|---|
| Sankaran Naren | ICICI Prudential MF | 12.9% |
| Anoop Bhaskar | UTI MF | 15.1% |
| Vinit Sambre | DSP MF | 16.7% |
| Harsha Upadhyaya | Kotak MF | 14.5% |
6 more rowsMay 8, 2024
Radhika Gupta, the new judge on Shark Tank India season 3, has already grabbed eyeballs for bringing her 1-year-old son on the set, setting up working mother goals for everyone. This season, the new entrant on the panel is the CEO of Edelweiss Mutual Fund and enjoys a humble net worth of 41 crore.
Who manages mutual funds in India? ›
The trustees of the mutual fund hold its property for the benefit of the unitholders. AMC approved by SEBI manages the funds by making investments in various types of securities. Custodian, who is required to be registered with SEBI, holds the securities of various schemes of the fund in its custody.
Reserve Bank of India. Securities and Exchange Board of India (SEBI)
Who establishes the mutual fund in India? ›
The first introduction of a mutual fund in India occurred in 1963, when the Government of India launched the Unit Trust of India (UTI). Mutual funds are broadly categorised into three segments: equity funds, hybrid funds, and debt funds.
Which AMC is best for mutual funds in India? ›
SBI Mutual Fund is the top AMC in India. Proudly connected to the State Bank of India (SBI), the largest bank in India.
Who is the largest mutual fund distributor in India? ›
Top 20 in the list
| Sr. No. | Name of the ARN Holder | AUM (Rs. Crore) |
|---|
| 1 | State Bank of India | 1,44,301 |
| 2 | NJ IndiaInvest | 1,24,025 |
| 3 | HDFC Bank | 96,729 |
| 4 | Axis Bank | 69,697 |
16 more rowsNov 9, 2023
AMFI is a representative of the RBI, SEBI, finance ministry and other bodies related to money market investments. An important role of AMFI in Mutual Funds is to distribute information about these investments and also conduct various workshops about different funds.
What is the role of SEBI in mutual funds in India? ›
As far as mutual funds are concerned, SEBI formulates policies and regulates the mutual funds to protect the interest of the investors. SEBI notified regulations for the mutual funds in 1993. Thereafter, mutual funds sponsored by private sector entities were allowed to enter the capital market.
What is the role of mutual funds in Indian financial system? ›
Mutual funds are designed as a trust to raise monies through the sale of units to the public for the purpose of investing in securities including money market instruments or gold, in line with a well defined objective. There are some clearly demarcated units in a mutual fund like the sponsor, the AMC, the trustee etc.
What is the role of mutual fund distributor in India? ›
Role of MF Distributor
They help educate investors about the different types of mutual funds available, their features, benefits, and risks. They help them understand how mutual funds work and how to choose the right scheme(s) for their individual needs.
