Skip to main content

Basic Mutual Fund terms

Mutual fund terms are:
Open ended schemes:
Under this scheme the shares are purchased and sold on the basis of net present value securities. There is no limited transaction under open ended scheme.

Close ended schemes: Under this scheme the limited shares are purchased and sold. The transactions are traded in exchange and for only those securities which are registered in exchange. The transaction occurred between fixed periods.

Entry load: It is a fee charged by Mutual Fund Company from investors for entering into any investment scheme.

Exit load: It is a fee charged by Mutual Fund Company from investors for quitting the Company. 

Net present value: It is a value of per unit shares investor buy from mutual funds Company or sells it back to the company. It is calculated by adding all the current price of all stocks, bonds in a portfolio and subtract the expenses related to the investment stocks like operating expenses etc and the result of it is divided by the total number of shares.

Systematic Investment Plan: It is fixed interval investment payment made by investors. It is easy and convenient way for investors to invest in equity funds in a small amount.

Initial Public Offering: Company raises its capital by issuing shares to public. If the company issue new shares to public is known as initial public offer.

Commercial paper: It is an unsecured short term investment instrument which is issued by company to finance its short term requirement like inventories , account receivable (company renders services or goods to its customer then the customer has to pay money for those services or goods to company that is known as account receivable for the company)etc. It matures in less than 270 days.

Asset Management Company: A Company who invested investors fund in different securities to maximise the return and minimise the risk of an investors is a Asset Management Company (AMC).

Treasury Bills: It is issued by government to meet its short term requirements. It is issued at discount but matures on face value. It does not pay any interest on treasury bills holder. The maturity period of Treasury bill is less than a year. There are three maturities period of Treasury bills that is 91 days, 182 days and 364 days.

Gilt funds: It is an investment instrument issued by government like bonds, treasury bills etc. which are less risky in comparison to other securities.

Spot rate: It is a rate in spot contract in which the buying and selling of stocks are made on spot date or current date with current rate. And on the basis of it forward rate is calculate.

Forward rate: It is a rate of forward contract in which payment made in predetermine future date and on predetermine rate.

Systematic Transfer Plan: The investors can transfer from one scheme to another scheme. They can transfer from debt to equity or vice versa.

Systematic Withdrawal Plan: The investors are able to withdraw funds from mutual fund on weekly, monthly or semi-annually basis according to their needs.

Equity linked saving schemes: The funds are invested in equity of different companies which gives tax deduction benefits to its investors.

Jobbers: They purchase and sell stocks for its own and deal with the brokers who act on behalf of public or its client. The jobbers quoted two price one on which he is ready to purchase the stock and another for sell of that stock. The difference between the two prices is a profit for jobbers.

R/T agents: Registrar and Transfer agents record all the investment related transaction of investors.


Comments

  1. Phani KumarJuly 07, 2020 3:55 pm

    Hey, thanks for the information. your posts are informative and useful. I am regularly following your posts.
    SK International IPO

    ReplyDelete

Post a Comment

Popular posts from this blog

How to calculate Cost of Preference Share Capital?

Cost of Preference Share Capital:  An amount paid by company as dividend to preference shareholder is known as Cost of Preference Share Capital. Preference share is a small unit of a company’s capital which bears fixed rate of dividend and holder of it gets dividend when company earn profit. Dividend payable is not a tax deductible amount. So, there is no tax adjustments required for comparing with cost of debt. Formula for Cost of Preference Share: Irredeemable Preference Share Redeemable Preference Share K p  = Dp/NP K p  = D p +((RV-NP)/n )/ (RV+NP)/2 Where, K p  = Cost of Preference Share D p  = Dividend on preference share NP = Net proceeds from issue of preference share (Issue price – Flotation cost) RV = Redemption Value N = Period of preference share Example:  A company issues 20,000 irredeemable preference share at 8% whose face value is Rs.50 each at 4% discount. Find out the Cost of Preference Share Capital.
87 comments
Read more

What is the difference between Cheque book and Pass book?

 Cheque book is issued by bank in customers / account holder request. With the help of this book account holder can withdraw cash from his/her account. Bank does not charge any fee to issued cheque book to its customer. But afterward bank charges some amount for using bank facility like cheque book, Debit card etc.So, Automatic some definite amount deducted from customer bank account. Pass book is  also issued by bank to its customer. It helps to record all the bank related activity according to date that is withdrawal and deposit. It is recorded by bank but the book is kept by customer to know the current balance of  his /her account.  Point of difference Pass book Cheque book What is the meaning of pass book and cheque book? Passbook is a book in which all withdrawal and deposit against customer account is recorded.   Cheque book is a book of cheques which are used to withdrawal the money to bank account.
Post a Comment
Read more

How to calculate interest on Hire Purchase System?

Interest on hire purchase:  Interest is calculated on Cash value of goods not in instalment value which includes cash value of goods and interest amount. It is calculated on yearly, quarterly and yearly basis. Interest is not calculated on down payment which is paid at delivery of goods. Depreciation is also charged on the hire purchase goods at the end of financial year. The method applies for depreciation is based on the contract between the parties.   Example:  Company V purchased a machine of Rs.70, 000 and paid Rs.5, 000 as down payment. The interest charged @6% and 8% depreciation annually. The instalment value for each year is Rs. 10,000. Find out the interest amount for 5 years. Solution: Interest calculated on Rs. Interest Instalment Cash Value 65, 000 65, 000*0.06 = 3, 900 12, 500 8, 600 56, 400 56, 400*0.06 = 3, 384 12, 500 9, 116 47, 284 47, 284*0.06 = 2, 837 12, 500 9, 6
3 comments
Read more