Type of Mutual Fund
-Open Ended
-Close Ended
Open Ended
-Any time entry & exit
-NFO 15 Days
-Post NFO buy & sell through AMC
-AMC offers liquidity . No fixed maturity
Close Ended
-NFO 15 Days
-Entry through NFO
-Exit at maturity
-Post NFO compulsory listing in stock exchange platform
-Limited liquidity
-Fixed maturity
Classification of Mutual Funds
- Passive Fund
- Active Fund
Passive Fund
- FMP- Fixed Maturity Funds
- Index Funds
Fixed Maturity Funds
- Buy & hold strategy . No frequent trading
- Buying & Holding a stock long term
- FMP is an example for Passive fund
- FMP is a close ended DEBT fund
- FMP maturity & Bond Maturity is same
- Fund manager will invest in bonds whose maturity & scheme maturity are same
- 3years FMP will invest only in bonds maturity in 3 years
Index
Before the index fund, we know what is index.
- Index or indices are benchmarks
- Purpose is to track stock market
- Sensex 30 of BSE & Nifty 50 of NSE
- Track performance of the top 30 companies and 50 companies respectively
- Sensex & Nifty is calculated based on price of 30/50 stocks
- Index tracks economy
Index Funds
- Invest in sensex 30 or Nifty 50
- Track sensex 30 or nifty 50
- Duplicate of sensex or nifty
- Fund manager role is less
- Return same as that of index. If sensex deliver 30% then fund should deliver 30% . If nifty return is -10% then nifty fund return will be -10%
- Performance - Mirror of index
Tracking Error
- Index return - Index fund return
- Sensex 30%, Sensex fund 25%
- Tracking error = 30-25=5%
- Deviation from index performance
- Tracking error is a measure of index fund performance
- Low tracking error - Good fund
Thank you
