Top 10 Reasons to Buy a Mutual FundWhy You Should Buy a Mutual FundByLee McGowanSee More About types of mutual funds diversification mutual fund benefits mutual fund fees liquiditySee More About types of mutual funds diversification mutual fund benefits mutual fund fees liquidityThere are many reasons to buy amutual fund. How about we look at the top 10 reasons to buy a mutual fund?1. Mutual Funds Offer DiversificationThe beauty of a mutual fund is that you can buy a mutual fund and obtain instant access to a hundreds of individual stocks or bonds. Otherwise, in order to diversify your portfolio, you might have to buy individual securities, which exposes you to more potential volatility.2. Mutual Funds are Professionally ManagedMany investors dont have the resources or the time to buy individual stocks. Investing in individual securities, such as stocks, not only takes resources, but a considerable amount of time. By contrast, mutual fund managers and analysts wake up each morning dedicating their professional lives to researching and analyzing current and potential holdings for their mutual fund.3. Mutual Funds Come in Many VarietiesA mutual fund comes in many types and styles. There are stock funds, bond funds,sector funds,target-date mutual funds,money market mutual fundsand balanced funds. Mutual funds allow you to invest in the market whether you believe in active portfolio management (actively managed funds) or you prefer to buy a segment of the market with no interference from a manager (passive funds andindex mutual funds). The availability of different types of mutual funds allows you to build a diversified portfolio at low cost and without much difficulty.4. Mutual Funds Have Low MinimumsMany mutual fund companies allow investors to get started in a mutual fund with as little as $1,000.Schwabs mutual fund familyhas a minimum of $100 for many of their mutual funds.5. Systematic Investing and Withdrawals with Mutual FundsIt is simple to invest regularly in a mutual fund. Many mutual fund companies allow investors to invest as little as $50 per month directly into a mutual fund. Money can be pulled directly from a bank account and invested directly in the mutual fund. On the other hand, money can be regularly withdrawn from a mutual fund and be deposited into a bank account. There are generally no fees for this service.6. Mutual Funds Offer Automatic ReinvestmentAn investor can easily and automatically have capital gains and dividends reinvested into their mutual fund without asales loador extra fees.7. Mutual Funds Offer TransparencyMutual fund holdings are publicly available (with some delays in reporting), which ensures that investors are getting what they pay for.8. Mutual Funds Are LiquidIf you want to sell your mutual fund, the proceeds from the sale are available the day after you sell the mutual fund.9. Mutual Funds Have Audited Track RecordsA mutual fund company must maintain performance track records for each mutual fund and have them audited for accuracy, which ensures that investors can trust the mutual funds stated returns.10. Safety of Investing in Mutual FundsIf a mutual fund company goes out of business, mutual fund shareholders receive an amount of cash that equals their portion of ownership in the mutual fund. Alternatively, the mutual funds Board of Directors might elect a new investment advisor to manage the mutual fund.While there are a plethora of investment options (individual stocks,ETFs, andclosed-end funds, to name a few) a mutual fund can offer a simple, efficient way to invest for retirement, education or other financial goals.Advantages of investing in Mutual Fund schemes:1)Mutual Fund Industry is well regulated and come under purview of SEBI. Mutual Fund Distributor has to compulsory pass the exam for selling the products and is given best training by all the AMCs with whom he is associated.2)Mutual Fund schemes are easy to compare, as the object of the fund is well defined. One can easily get the details of risk involved in the scheme by reading offer document or KIM (Key Information Memorandum).3)You get the benefit of diversification when you invest through MF schemes. You get diversification across all sectors and also among different stocks listed in the stock market. Diversification reduces the risk of investment and gives better results in the longer run.4)You can also diversify across three major asset classes as you can invest in debt, equity and also in gold through mutual fund schemes.5)You get the advantage of professional management. Experts in the industry called fund managers manage fund and try their best to deliver good returns to investors.6)The procedure to invest in mutual fund is also very simple and also schemes are highly liquid.7)The service available today is also one of the best in India and you can excess all your investment details online.8)You can start with very nominal amount of Rs. 5,000 or SIP with Rs. 500 and get the advantage of long-term equity investment.9)SIP (systematic investment plan) option available in mutual fund schemes is always better for investing in equity in the long run. You get rupee cost averaging, which lowers the average cost and you get the advantage of power of compounding.10) Debt products are also attractive if you understand the interest rate cycles. In the falling interest rate scenario the debt fund is likely to give double-digit return.11) A hybrid product available in the mutual fund like MIP and Balanced Fund are also good for freshers who do not understand the equity market but can start with lower exposure to equity.12) Mutual Fund schemes are more transparent. Daily NAV is declared. Portfolio of the schemes is also available every month. There are many agencies that rate the mutual fund schemes depending on risk and reward attached to the schemes.Unit Trust of India: Objectives, Functions and SchemesbySmriti ChandIndiaUnit Trust of India: Objectives, Functions and Schemes!Unit Trust of India (UTI) is a statutory public sector investment institution which was set up in February 1964 under the Unit Trust of India Act, 1963.UTI began operations in July 1964. It provides opportunity for small-savers to invest in areas where their risk is diversified.The Unit-holders, if necessary, can sell their units to UTI at the prices determined by UTI. One of the attractions is that the investment in UTI has an income-tax rebate and the income from the UTI is exempted; from income-tax subject to certain limits.Objectives:The primary objectives of the UTI are:(i) To encourage and pool the savings of the middle and low income groups.(ii) To enable them to share the benefits and prosperity of the industrial development in the country.Organisation and Management:UTI was established with an initial capital of Rs. 5 crore, contributed by the RBI, LIC, SBI and its subsidiaries and scheduled banks and financial institutions. The initial capital of Rs. 5 crore was divided into 1,000 certificates of Rs. 50,000 each. To supplement its financial resources, the trust can borrow from the Reserve Bank of India, the amount being repayable on demand or within a period of 18 months.UTI is managed by a Board of Trustees, consisting of a chairman and four members nominated by Reserve Bank of India, one member nominated by LIC, one member nominated by the State Bank of India, and two members elected by the contributing institutions.Functions of UTI:The UTI functions are discussed below:(i) To accept discount, purchase or sell bills of exchange, promissory note, bill of lading, warehouse receipt, documents of title to goods etc.,(ii) To grant loans and advances.(iii) To provide merchant banking and investment advisory service.(iv) To provide leasing and hire purchase business.(v) To extend portfolio management service to persons residing outside India.(vi) To buy or sell or deal in foreign exchange dealings.(vii) To formulate unit scheme or insurance plan in association with or as agent of GIC.(viii) To invest in any security floated by the Central Government, RBI or foreign bank.Activities of UTI:The UTI can sell and purchase the units issued by it, investing, acquire, hold or dispose off securities. Keep money on deposit with the scheduled banks and undertake related functions incidental or consequential to that. All the units issued by the UTI are of the value of Rs. 10 each. These units were put on sale at face value and thereafter at prices fixed daily by the UTI. Units can be purchased in ten or multiples of ten.Schemes of UTI:The familiar schemes of UTI are given below:(i) Unit scheme1964.(ii) Unit Linked Insurance Plan1971.(iii) Children Gift Growth Fund Unit Scheme1986.(iv) Rajyalakhmi Unit Scheme1992.(v) Senior Citizens Unit Plan1993.(vi) Monthly Income Unit Scheme.(vii) Master Equity Plan1995.(viii) Money Market Mutual Fund1997.(ix) UTI Growth Sector Fund1999.(x) Growth and Income Unit Schemes.Advantages of Unit Trust:The advantages of Unit Trust are:(i) The investment is safe and the risk is spread over a wide range of securities.(ii) The Unit-holders will be getting regular and good income, as 90 percent of its income will be distributed.(iii) Dividends up to Rs. 1,000 received by the individual are exempt from income-tax.(iv) There is a high degree of liquidity of investment as the units can be sold back to the trust at any time at prices fixed by trust.introductionUTI was established by an Act of Parliament on November 26. 1963. It started the sale of its units on July 1, 1964. It was established to encourage and mobilise savings of small investors through the sale of its units, and to channelise these resources into corporate securities.

Advantages of Mutual Funds

The ten main advantages ofmutual fundsare depicted below.

Ten prominent benefits or advantages of mutual funds are as follows:1. Mutual funds are simple to invest in.2. Professionally managed.3. Offers diversification.4. Conveniently administered.5. Gives higher returns.6. Low cost management.7. Offers liquidity.8. Provides transparency.9. Highly regulated.10. Allows switching to other schemes.Now let's continue to discuss above benefits of mutual funds.

1. Simple to invest

Investment in mutual fund is simple as compared to other availableinvestmentsin the market. The minimum investment required is pretty less.SIP (Systematic Investment Plan) can start with a contribution of say just $10 (approx. INR 500) on a monthly basis. Furthermore, most of the schemes of the mutual fund have an automatic reinvestment plans.

2. Professionally managed

Mutual funds are managed by skilled and professionally experienced managers with a backup of a research team. The fund managers help to channel the funds in the best available growth opportunities.Investors purchase mutual fund because they do not have a time or the expertise to manage their ownportfolio. A fund manager on their behalf helps to resolve such issues.

3. Offers diversification

Mutual fund offers diversification in a portfolio which reduces theriskof fall in a value of investments.Purchasing units in a mutual fund is a best option, instead of buying individual stocks or bonds. The investment risk is spread out and minimized up to a certain extent.The basic idea behind diversification is to invest in a large number of assets so that a loss in any particular-investment is minimized by gains in other investments.

4. Conveniently administered

In mutual fund, there is no administrative risk of share transfer, as many funds offer these services in their Demat trading accounts, which finally save investor's time. These proper and prompt services help the investor to grab the available growth opportunities.

5. Gives higher returns

Investor usually gets higher returns in mutual fund as compared to other avenues of investment.There are various schemes of mutual fund offered by, HDFC, ICICI, Franklin Templeton, etc. They have provided excellent returns. However, investors have to be cautioned that such high returns are not to be taken as consistent and regular returns.

6. Low cost management

As per the policy of the various statutory authorities, the organizations operating the mutual fund can only shift certain prescribed percentage of cost on the investors. The extra cost incurred such as management expenses has to be borne by the organization.An operating cost of mutual fund is considered to be relatively less expensive. Since, it buys and sells large amounts (quantity) of securities at a time, this helps in reducing transaction costs.Thus, mutual fund assures low cost management.

7. Offers liquidity

A mutual fund can be easily liquidated at the request of an investor. Just like an individual stock, it also allows investors to liquidate their holdings as and when they feel it necessary.

8. Provides transparency

Statutory authorities have compelled all the mutual fund companies to disclose their Net Assets Value (NAV). The NAV is calculated on daily basis and are regularly published through the available media.Thus, mutual fund companies disclose their financial statements to their investors and to others.

9. Highly regulated

Mutual funds all over the world are highly regulated. The fund manager has to submit all necessary documents to the statutory authorities for their approval, to make investment in the required securities.

10. Allows switching to other schemes

Mutual fund gives an option to an investor, to switch to other schemes whenever they like, without any charges. This helps the investor to take benefit of the various available schemes which will finally help him/her to maximize returns on investment.

Conclusion

The prime motive of mutual fund is to give small investors an access to invest in the stocks, bonds, shares and other securities. Without it, it would be impossible for them to invest in such financial securities with limited funds.Furthermore, mutual funds are professionally managed to mitigate (reduce) the probability of risk, to a certain extent.Disadvantages of Mutual Funds

The seven prominent disadvantages ofmutual fundsare depicted below.

The main limitations or disadvantages of mutual funds are as follows:1. Mutual funds are subject to market risk.2. No guarantee of returns.3. Diversification of portfolio doesn't maximize returns.4. Selecting right financial securities is not easy.5. Cost management not proportional to performance.6. Unethical practices may creep in.7. 12b-1 fees.Now let's discuss above limitations of mutual funds one by one.

1. Subject to market risk

Mutual fund investments are subject to marketriskinvolved. This caution (warning) can be checked with the offer document where it is clearly mentioned as follows:"Mutual Fund investments are subject to market risks. Please read the offer document carefully before investing."

2. No guarantee of returns

Mutual funds do not give any guarantee of the returns for theinvestmentsmade in its various schemes.

3. Diversification of portfolio doesn't maximize returns

Mutual fund helps to diversify the portfolio. However, though the diversification ofportfoliohelps in minimization of risk, these do not results in maximization of returns to the investors.

4. Selecting right financial securities is not easy

It's difficult task for a mutual fund manager to select appropriate and suitable financial securities for investment to generate higher returns.

5. Cost management not proportional to performance

Mutual fund managers are one of the highest-paid executives in thefinancedomain. Furthermore, the fee paid to the Asset Management Company (AMC) is no way related to the performance of these funds.

6. Unethical practices may creep in

Mutual fund managers may follow unethical (corrupt) practices to boost the performance of the various fund-related schemes.UTI Mutual FundUTI Mutual Fund came into existence on 1st February 2003. Bank of Baroda (BOB), Punjab National Bank (PNB) and State Bank of India (SBI) and Life Insurance Corporation of India (LIC) are the sponsors of the UTI Mutual Fund. UTI Mutual Fund is managed by UTI Asset Management Company Private Limited (AMC). UTI AMC is a registered portfolio manager under the SEBI (Portfolio Managers) Regulations, 1993 for undertaking portfolio management services and also acts as the manager and marketer to offshore funds.

UTI Mutual Fund has a nationwide network consisting 70 UTI Financial Centers (UFCs) and UTI International offices in London, Dubai and Bahrain. The fund has a track record of managing a variety of schemes catering to the needs of every class of citizenry.Open Ended UTI Auto Sector Fund UTI Balanced Fund UTI Banking Sector Fund UTI Bond Advantage Fund LTP UTI Bond Fund UTI Brand Value Fund UTI Charitable & Religious Trust & Registered Society UTI Children Career Bond Plan UTI Contra Fund UTI Dividend Yield Fund UTI Dynamic Equity Scheme UTI Energy Fund UTI Equity Fund UTI Equity Tax Savings Plan UTI Floating Rate Fund STP UTI Growth and Value Fund UTI Growth Sector Fund Services UTI Growth Sector Fund Software UTI Index Select Fund UTI India Advantage Equity Fund UTI Infrastructure Fund UTI Large Cap Fund UTI Leadership Equity Fund UTI Liquid Cash Plan UTI Liquid Short Term Plan UTI Mahila Unit Scheme UTI Master Index Fund UTI Master Plus Unit Scheme UTI Master Value Fund UTI Mastergain Unit Scheme UTI Mastershare Unit Scheme UTI Mid Cap Fund UTI MIS Advantage plan UTI MNC Fund UTI Money Market Fund UTI Monthly Income Scheme UTI Nifty Index Select Fund UTI Opportunities Fund UTI Petro Fund UTI PSU Fund UTI Retirement Benefit Pension Fund UTI Services Industries Fund UTI SPREAD Fund UTI Sunder UTI Top 100 Fund UTI ULIP UTI Unit Scheme 2002 UTI Variable Investment Scheme UTI Wealth Builder Fund Series II UTI-Children Career Plan (Bond) UTI-G-SEC STP UTI-G-Sec-Investment Plan UTI-Gilt Advantage Fund LTP UTI-Growth Sector Fund Pharma

Close Ended UTI Capital Protection Oriented Scheme UTI India Lifestyle Fund UTI Long-Term Advantage Fund UTI MEPUS UTI Wealth Builder Fund

arties Involved:-There are several parties involved in the organization and operation of a mutual fund such as;Fund ManagerPortfolio AdviserPrincipal DistributorCustodianTransfer Agent and RegistrarAuditorTrusteeFund ManagerFund manager is the person who establishes and manages the mutual funds, markets them and manages their general administrationPortfolio AdviserPortfolio Adviser is aprofessional money managerappointed by theMutual Fund Manager.His duty is to direct the fund's investments. The Fund Manager also often acts as the Portfolio Adviser.Principal DistributorPrincipal Distributor coordinates the sale of Mutual Fund to investors. It can be either directly or through a network of registered dealers.CustodianCustodian will be a bank or trust appointed by theMutual Fund Managerto hold all of the securities owned by the fund.Transfer Agent and RegistrarThe group responsible for maintaining a list of all investors in the fund is called as Transfer Agent and Registrar.AuditorAuditors are the independent accountants retained by theMutual Fund Managerto audit each year, and report on the financial statements of the fund.TrusteeThe entity that has title to the securities owned by the fund on behalf of the unit holders is called as Trustee

Sponsor:Any registered company or a financial institution is called a sponsor. A sponsor is the most important entity of a fund. As per SEBI, a sponsor must have a good financial record in past.Parties InvolvedInvestors: People who invest money in the mutual fundTrustees: Trustees are the people within a Mutual Fund organization, who are responsible for ensuring that investors interests are taken care of.Asset Management Company (AMC): AMC manages the investment portfolios of schemesDistributors: A person or a party responsible for bringing investors into the schemes of a MFRegistrars: The Registrar keeps a track of the investors investments and dis-investmentCustodian / Depository: An entity, usually a bank or Trust company, which holds and safeguards securities owned by a Mutual Fund