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SPEEDY Railway Book (English)

Details about Mutual Funds for Banking Exams


Mutual funds are associations or trusts of members of public who wish to make investments in the financial instruments or assets of the business sector or corporate sector for the mutual benefit of its members.

The fund collects the money of these members from their savings and invests them in a diversified portfolio of financial assets with a view to reduce the risks and to maximize their income and capital appreciation for distribution to its members on a pro-rata basis.
They enjoy collectively the benefit of expertise in investment by specialists in the trust which single individual himself could not. Mutual fund is thus a concept of mutual help of subscribers for portfolio investment and management of these investments by experts in the field.
These funds are close ended with contributions collected during and for a definite time frame or open ended under which the units are purchased and sold throughout the year and a member can enter the scheme or walk out of it, any time. Funds can also be income funds, growth funds or tax saving scheme funds. They can also be classified from deployment or investment aspect.

Mutual Fund Terms:
  • Asset Management Company
  • Balanced Fund
  • Back-End Loan
  • Close-Ended Scheme
  • Discount or Premium
  • Expense Ratio
  • Equity Income Fund
  • Fixed Income Funds
  • Tax Saving Schemes
  • Rollover Risk
  • Pure No-Load Fund
  • Rollover Risk
  • Portfolio Manager
  • Open Ended Scheme
  • Net Assets
  • Net Asset Value
  • Market Capitalization
  • Management Fees
  • Index Fund
  • Income Fund
  • Growth Fund
  • Growth and Income Fund
  • Front End Load

Mutual Fund Terms:
  1. Asset Management Company – It is a company formed and registered under the companies Act 1959 and approved as such by the SEBI to manage the funds of a mutual fund.
  2. Balanced Fund – This fund invests in bonds and blue chip stocks to conserve capital.
  3. Back-End Loan – A fee charged by a mutual fund from unit holders at the time of redemption of units.
  4. Close-Ended Scheme – This is a scheme where funds are raised for affixed period. This scheme is would up after that period and funds are returned with capital appreciation to unit holders.
  5. Discount or Premium – This is the difference between the unit price and the net asset value expressed in percentage terms.
  6. Expense Ratio – The annual expenses of a fund, including the management fee, administrative costs, divided by net assets.
  7. Equity Income Fund – That is a portfolio whose focus is on stocks with high-dividend yields. Similar to growth and income portfolios except that these funds usually place more stress on dividend yield.
  8. Fixed Income Funds – This is a mutual fund which primarily invests in fixed income securities like bonds and debentures.
  9. Tax Saving Schemes – This is a mutual fund scheme formulated under the Govt. of India guidelines on equity-linked savings schemes. Investors under this scheme are entitled for certain tax exemptions.
  10. Pure No-Load Fund – This is a mutual fund that has neither front nor back end.
  11. Rollover Risk – A danger faced by holders of shorter debt including money market funds. If interest rates are falling then these investors must roll-over any maturing obligations into successively lower-yielding instruments.
  12. Portfolio Manager – A professional investment manager who conducts securities business following to stated objectives and by using sophisticated investment management approach.
  13. Open Ended Scheme – A scheme is the one which continuously offers its units and buys them back from investors.
  14. Net Assets – The total value of fund’s cash and securities less its liabilities or obligations.
  15. Net Asset Value – The price or value of one share of a fund. It is calculated by sum the quoted values of all the securities held by the fund, adding in cash and any accrued income and subtracted liabilities and dividing the result by the number of shares outstanding.
  16. Market Capitalization – The total market value of a film used as a measure of size. It is determined by multiplying the current price by the number of shares outstanding.
  17. Management Fees – The percentage charge for portfolio management. This expense, which is stated in the fund’s prospectus.
  18. Index Fund – This is a mutual fund which mirrors the performance of a particular index. Such a fund invests all or nearby all its funds in stocks listed on a particular exchange and included in the index of that exchange.
  19. Income Fund – An income oriented fund targets at giving regular income to its investors so long as the scheme is in operation.
  20. Growth Fund – A growth fund aims at rapid capital appreciation of funds by making investments in those securities which are expected to show large appreciation quickly.
  21. Growth and Income Fund – A fund holding large, established companies offering the potential for both appreciation and dividend income.
  22. Front End Load – A sales fee charge at the time of purchase.

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