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Mutual Funds Proposal Essay

708 Words3 Pages

Investment Objective – It is important to know the investment objective of any mutual fund before investing in it. The investment objective describes the objective behind launching a particular mutual fund scheme and how it will be attained. It is vital for investors to read it well because the investment objective of the scheme could be far different than the ones suiting investor’s requirement.

Asset Allocation – In this part it is specified how a particular mutual fund scheme will allocate its assets under management to the respective asset classes under normal market conditions. Rather than mentioning a fixed percentage to be invested in a particular asset class, a range is provided indicating the minimum and maximum coverage to that …show more content…

Investment Instruments the scheme is investing in: Within an asset class, there are numerous investment opportunities. For example in an equity oriented scheme, if the scheme aims to have a high exposure towards riskier instruments such as derivatives, it could impact the final returns generated by the mutual fund scheme. However, if a mutual fund scheme takes exposure to derivative instruments purely for hedging their positions then it may not turn out to be of very high risk to investors.

Benchmark of the scheme- It is important to know how a particular mutual fund scheme benchmarks its performance. A benchmark is selected so that the suitable constituents of the same are structured in the portfolio of the respective mutual fund scheme as well.

Risk factors associated with the respective mutual fund scheme- There are several risks associated with mutual funds like liquidity risk, default risk, interest rate risk, re-investment risk. Investors should be aware of these risks before investing in a mutual

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