[Economy] Mutual Funds and Entry Load

What is Mutual fund?

What the Entry Load?
Sidenote: RGESS
Not really an article but a quick response to some readers questions
What is Mutual fund?
They accept money from common people and invest it in shares and bond marks.
And whatever profit / interest they make, they give back to the customer after cutting
their profit Margin.
A mutual fund is a type of professionally-managed collective investment scheme that
pools money from many investors to purchase securities (Wikipedia)
A mutual fund is nothing more than a collection of stocks and/or bonds. You can think of a mutual fund as a company that brings
together a group of people and invests their money in stocks, bonds, and other securities. (investopedia)
What the Entry Load?
Mutual fund company pays Commission to the distributors (those agents / brokers etc), to market and sell their schemes.
Earlier Mutual funds used to charge 2.25% entry load from customers.
Meaning, if you give Rs.100 to the agent, the mutual fund company will only invest Rs.97.75 in various shares, bonds etc. while
the Rs.2.25 was paid to the agent who introduced you to the scheme and filled up your paperwork etc.
SEBI chairman believed that it is not good, these middlemen are not adding any value to the investment. hence he banned Entry
load thing from Aug09
Result: the agents started selling other products where Commissions are higher. Mutual funds started losing clients. After all this
mutual fund/ pension /insurance / childplans/ ULIP etc is a game of marketing (and fooling) people.
So in June 2012, the mutual fund-walla went to Finance minister and asked him to resume the Entry load mechanism.
FM has asked SEBI to look into the matter. So the matter is still being looked into.
SEBI chairman still says that entry loads are not good. At most we can allow MF to invest in Rajiv Gandhi equity saving scheme
(RGESS).
Sidenote: RGESS
recall that RGESS was launched to cut the middle men and lure middle-class investors into the capital market, otherwise they only
invest money in gold, real estate = problem of inflation, black money and current account deficit.
But after launching the RGESS, Pranab realized the mistake that most of his target audience (middle class junta) doesnt have
PAN cards and DEMAT account, which are prerequisite to play in shares and bonds investment. Then Government started
talking about no frills DEMAT Account.
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4 comments to [Economy] Mutual Funds and Entry Load
shonee
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thnku so much mrunal.
can u explain 1 more topic NAV under mutual fund?
N THE SCHEMES OFFERED BY M.F.?
salman
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NAV=net asset value in the simplest form it is a kind of earning in M.F
suppose u have invested 100 rs in M.F the M.F agent will invest your money in 10 sectors share for instance reliance energy,reliance
telecom,reliance industries ,HPCL,Hindustan lever etc. and the maturity period of yor M.F is 2 years and in these two years reliance
energy gained 2 points, reliance telecom lost 4 points , reliance industries lost 1 point HPCL gained 16 points ,hindustan lever gained 6
points so the total points will be +2-4-1+16+6=+19points so your total will be 19 point which will be your earning depending upon the market
value to each point on the day of maturity you will get the extra money i.e., money in addition to you initial investment.
M.F investment is totally exempted from the tax liability
CARM
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SEBI is making huge changes nowadays..continuously one after d other.can u explain in gist nd in simple terms covering the
maximum.thnx in advance.
RUPINDER
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Hello sir, will you please explain gross NPA, net NPA, what is provisioning along with this ?