How funds are sold
Mutual funds rely primarily on individual brokers and distribution companies to market their schemes to investors. Today, they also market their schemes directly.
Individual brokers who sell various mutual fund schemes also act as financial advisors to many investors. Therefore, they must pass several exams before acting as an agent. Many mutual funds prefer to deal with a distribution agency rather than individual agents because it is easier to manage. These distribution agencies, with their highly qualified executives, will be able to offer investors better financial advice than individual agents.
Today, sales officers and other employees of investment companies approach investors (particularly high net worth individuals and corporate clients) directly to sell different schemes. However, most mutual fund sales are made through a distribution route other than direct marketing.
investment policies
Each Mutual Fund has a specific investment policy that will be described in the Mutual Fund’s prospectus. A family of Mutual Funds will be managed by an Asset Management Company. This asset management company will collect funds from investors and charge a management fee for operating them. They allow investors to invest in different market sectors and switch assets between funds while benefiting from centralized record keeping.
The investment policies of the different types of funds are as follows:
Oh Variable Income Funds. They invest in stocks. However, they will keep 4% to 5% of their assets in money market securities to provide liquidity. Income funds will hold stocks of companies that give a high dividend yield, and growth funds will hold stocks of companies that allow for faster capital appreciation. Sector funds focus on a particular industry.
Oh Debt Funds. These funds invest in fixed income securities. Different funds will focus on Treasury bills, corporate bonds, mortgage-backed securities, and other types of bonds. Some of the funds also specialize in maturity.
Oh Index funds. Index funds buy stocks that are included in a particular index in proportion to each stock’s representation in that index. Investing in index funds is a passive strategy because investors do not need to do any security analysis.
Oh Money market funds. These funds invest in short-term, low-risk money market instruments. Since liquidity is high, some of the funds even offer check writing services to their investors.
In addition to these funds, there are many different varieties of funds with unique investment policies, such as international funds that invest in different securities around the world, balanced funds that minimizes risk without greatly compromising current revenue and growth opportunities and flexible funds It depends on the moment of the market.
