What are Mutual Fund Houses?
What are Mutual Fund Houses? Definition and Factors
When you start your investment journey, you may not be aware of the path your money follows. An asset management company, also known as a mutual fund house, takes responsibility for choosing the right assets for your money. You simply must make a choice and select an asset class. That could be equity, debt or commodities.
- About Mutual Fund Houses
Mutual funds are a convenient option to start investing for ordinary investors. A particular Asset Management Company (AMC), also known as a mutual funds house, pools the investment from several investors with a joint investment objective stated in the scheme's offer document. A fund manager is an expert in strategising investments, manages the collected assets from the investors. The fund manager invests the money collected from the investors in financial securities like stocks and bonds; the ultimate aim of this exercise is to maximise the returns on investment for the investors.
- Factors to watch When Investing in Mutual Funds
Before investing in any scheme of a mutual fund, you must consider some factors such as:
i. The credibility of the Fund Manager
In every AMC, the final decision of investment and strategising is dependent on the fund manager. You would like to allow your hard-earned money to be managed by a good fund manager. So, check the credentials of the fund manager in terms of their experience and expertise in managing funds.
ii. The reputation of the Fund House
Before deciding on which mutual fund house to invest in, ensure to review important information of the AMC and get feedback from reading online. Mutual funds involve some risks, so it is better to research and study the firm before investing. A reputed AMC which has a good track record may be preferred for investment.
iii. Performance Against Benchmark
You compare performance and stock allocation in mutual funds against the standard benchmark index of a mutual fund scheme. The investment objective of the scheme should match the asset allocation of a benchmark index.
Here's an example to understand this better. The benchmark index of a large-cap mutual fund is the index of large stock caps in the stock exchange. You should compare the mutual fund with a focus on banking stocks with the banking stock index.
iv. Performance Consistency
It is essential to check a mutual fund to generate good returns to the investor consistently over time. A mutual fund is good if it can provide consistent returns in bullish and bearish stock market periods.
v. Investment Objective and Period
You should Have an objective for the investment. An investment objective can be buying a property, child's education, retirement plan, vacation, or believing that latest mobile phone.
Also, consider the time for which you want to keep the money invested in the scheme. The time duration for funds can be as short as a day or as long as five years or more. It depends upon when the investor needs their money back. Different types of mutual funds have different time duration for other financial goals. You can opt for a scheme that suits your needs.
The mutual fund's houses have created a brand of their own by generating higher returns to investors than other mutual funds. We hope you take these factors as mentioned above into consideration before investing in mutual funds.
ICICI Securities Ltd.( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Centre, H. T. Parekh Marg, Churchgate, Mumbai - 400020, India, Tel No : 022 - 2288 2460, 022 - 2288 2470. AMFI Regn. No.: ARN-0845. We are distributors for Mutual funds. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully. Please note, Mutual Fund related services are not Exchange traded products and I-Sec is just acting as distributor to solicit these products. All disputes with respect to the distribution activity, would not have access to Exchange investor redressal forum or Arbitration mechanism. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. The contents herein mentioned are solely for informational and educational purpose.