Mutual funds for Financial Planning Mcom sem 1 Delhi University
mutual funds for Financial Planning MCOM sem 1 Delhi University:- we will provide complete details of mutual funds for Financial Planning MCOM sem 1 Delhi University in this article.
Mutual funds for Financial Planning Mcom sem 1 Delhi University
A mutual fund is a professionally managed investment fund that pools money from many investors to purchase securities. Mutual funds have advantages and disadvantages compared to direct investing in individual securities. The primary advantages of mutual funds are that they provide a higher level of diversification, they provide liquidity, and they are managed by professional investors. On the negative side, investors in a mutual fund must pay various fees and expenses.
Primary structures of mutual funds include open-end funds, unit investment trusts, and closed-end funds. Exchange-traded funds (ETFs) are open-end funds or unit investment trusts that trade on an exchange. Mutual funds are also classified by their principal investments as money market funds, bond or fixed income funds, stock or equity funds, hybrid funds or other. Funds may also be categorized as index funds, which are passively managed funds that match the performance of an index, or actively managed funds. Hedge funds are not mutual funds; hedge funds cannot be sold to the general public and are subject to different government regulations.
mutual funds for Financial Planning Mcom sem 1 Delhi University
Advantages and disadvantages to investors
Mutual funds have advantages and disadvantages compared to investing directly in individual securities:-
- Increased diversification: A fund diversifies holding many securities; this diversification decreases risk.
- Daily liquidity: Shareholders of open-end funds and unit investment trusts may sell their holdings back to the fund at regular intervals at a price equal to the net asset value of the fund’s holdings. Most funds allow investors to redeem in this way at the close of every trading day.
- Professional investment management: Open-and closed-end funds hire portfolio managers to supervise the fund’s investments.
- Ability to participate in investments that may be available only to larger investors. For example, individual investors often find it difficult to invest directly in foreign markets.
- Service and convenience: Funds often provide services such as check writing.
- Government oversight: Mutual funds are regulated by a governmental body
- Transparency and ease of comparison: All mutual funds are required to report the same information to investors, which makes them easier to compare
Mutual funds have disadvantages as well, which include:
- Less control over timing of recognition of gains
- Less predictable income
- No opportunity to customize
mutual funds for Financial Planning Mcom sem 1 Delhi University:-Regulation and Operation
In the United States, the principal laws governing mutual funds are:
- The Securities Act of 1933 requires that all investments sold to the public, including mutual funds, be registered with the SEC and that they provide potential investors with a prospectus that discloses essential facts about the investment.
- The Securities and Exchange Act of 1934 requires that issuers of securities, including mutual funds, report regularly to their investors; this act also created the Securities and Exchange Commission, which is the principal regulator of mutual funds.
- The Revenue Act of 1936 established guidelines for the taxation of mutual funds. Mutual funds are not taxed on their income and profits if they comply with certain requirements under the U.S. Internal Revenue Code; instead, the taxable income is passed through to the investors in the fund. Funds are required by the IRS to diversify their investments, limit ownership of voting securities, distribute most of their income (dividends, interest, and capital gains net of losses) to their investors annually, and earn most of the income by investing in securities and currencies. The characterization of a fund’s income is unchanged when it is paid to shareholders. For example, when a mutual fund distributes dividend income to its shareholders, fund investors will report the distribution as dividend income on their tax return. As a result, mutual funds are often called “pass-through” vehicles, because they simply pass on income and related tax liabilities to their investors.
- The Investment Company Act of 1940 establishes rules specifically governing mutual funds.
- The Investment Advisers Act of 1940 establishes rules governing the investment advisers that serve as the fund sponsor or fund management company (often referred to as the fund manager).
- The National Securities Markets Improvement Act of 1996 gave rulemaking authority to the federal government, preempting state regulators. However, states continue to have authority to investigate and prosecute fraud involving mutual funds.
Open-end and closed-end funds are overseen by a board of directors, if organized as a corporation, or by a board of trustees, if organized as a trust. The Board must ensure that the fund is managed in the interests of the fund’s investors. The board hires the fund manager and other service providers to the fund. The fund sponsors trades (buys and sells) the fund’s investments in accordance with the fund’s investment objective. Funds that are managed by the same company under the same brand are known as a fund family or fund complex.
The sponsor or fund management company, often referred to as the fund manager, trades (buys and sells) the fund’s investments in accordance with the fund’s investment objective. A fund manager must be a registered investment adviser. Funds that are managed by the same company under the same brand are known as a fund family or fund complex.
In the European Union, funds are governed by laws and regulations established by their home country. However, the European Union has established a mutual recognition regime that allows funds regulated in one country to be sold in all other countries in the European Union, but only if they comply with certain requirements. The directive establishing this regime is the Undertakings for Collective Investment in Transferable Securities Directive 2009, and funds that comply with its requirements are known as UCITS funds.
Regulation of mutual funds in Canada is primarily governed by National Instrument 81-102 “Mutual Funds.” NI 81-102 is implemented separately in each province or territory. The Canadian Securities Administrator works to harmonize regulation across Canada.
in the Hong Kong market: mutual funds are regulated by two authorities.
- The Securities and Futures Commission (SFC) develops rules that apply to all mutual funds marketed in Hong Kong.
- The Mandatory Provident Funds Schemes Authority (MPFA) rules apply only to mutual funds that are marketed for use in the retirement accounts of Hong Kong residents. The MPFA rules are generally more restrictive than the SFC rules.
In Taiwan, mutual funds are regulated by the Financial Supervisory Commission (FSC).
mutual funds for Financial Planning MCOM sem 1 Delhi University
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