1. Professional Management — Investors may not have the time or the required knowledge and resources to conduct their research and purchase individual stocks or bonds. A mutual fund is managed by full-time, professional money managers who have the expertise, experience and resources to actively buy, sell, and monitor investments. A fund manager continuously monitors investments and rebalances the portfolio accordingly to meet the scheme’s objectives. Portfolio management by professional fund managers is one of the most important advantages of a mutual fund.
2. Risk Diversification — Buying shares in a mutual fund is an easy way to diversify your investments across many securities and asset categories such as equity, debt and gold, which helps in spreading the risk - so you won't have all your eggs in one basket. This proves to be beneficial when an underlying security of a given mutual fund scheme experiences market headwinds. With diversification, the risk associated with one asset class is countered by the others. Even if one investment in the portfolio decreases in value, other investments may not be impacted and may even increase in value. In other words, you don’t lose out on the entire value of your investment if a particular component of your portfolio goes through a turbulent period. Thus, risk diversification is one of the most prominent advantages of investing in mutual funds.
3. Affordability & Convenience (Invest Small Amounts) — For many investors, it could be more costly to directly purchase all of the individual securities held by a single mutual fund. By contrast, the minimum initial investments for most mutual funds are more affordable.
4. Liquidity — You can easily redeem (liquidate) units of open ended mutual fund schemes to meet your financial needs on any business day (when the stock markets and/or banks are open), so you have easy access to your money. Upon redemption, the redemption amount is credited in your bank account within one day to 3-4 days, depending upon the type of scheme e.g., in respect of Liquid Funds and Overnight Funds, the redemption amount is paid out the next business day.
However, please note that units of close-ended mutual fund schemes can be redeemed only on maturity. Likewise, units of ELSS have a 3-year lock-in period and can be liquidated only thereafter.
5. Low Cost — An important advantage of mutual funds is their low cost. Due to huge economies of scale, mutual funds schemes have a low expense ratio. Expense ratio represents the annual fund operating expenses of a scheme, expressed as a percentage of the fund’s daily net assets. Operating expenses of a scheme are administration, management, advertising related expenses, etc. The limits of expense ratio for various types of schemes has been specified under Regulation 52 of SEBI Mutual Fund Regulations, 1996.
6. Well-Regulated — Mutual Funds are regulated by the capital markets regulator, Securities and Exchange Board of India (SEBI) under SEBI (Mutual Funds) Regulations, 1996. SEBI has laid down stringent rules and regulations keeping investor protection, transparency with appropriate risk mitigation framework and fair valuation principles.
7. Tax Benefits —Investment in ELSS upto ₹1,50,000 qualifies for tax benefit under section 80C of the Income Tax Act, 1961. Mutual Fund investments when held for a longer term are tax efficient.
FAQs
The Association of Mutual Funds in India (AMFI) is an association of all the Asset Management Companies (AMCs) of SEBI registered mutual fund houses in India. AMFI was incorporated on 22nd August 1995 as a non-profit organization.
Who regulates AMFI in India? ›
Association of Mutual Funds in India (AMFI) is a non-profit industry body of the asset management companies (AMCs) of all Mutual Funds in India that are registered with Securities and Exchange Board of India (SEBI).
Is AMFI a self-regulatory organization? ›
Read more in the article. The Association of Mutual Funds in India (AMFI) is a self-regulatory organisation (SRO) for the mutual fund industry in India. It was established in 1995 to protect the interests of investors in mutual funds.
Who is the authority of mutual funds in India? ›
The Securities and Exchange Board of India (SEBI) is India's major regulatory agency for mutual funds. SEBI is responsible for regulating all elements of mutual funds, including the establishment of mutual funds, their operations, the administration of mutual funds, fees charged by mutual funds, and their performance.
Who is the CEO of Association of Mutual Funds in India? ›
Director at State Bank of India • New Chief Executive to focus on MF industry's growth aspects and AMFI 2.0 strategy. Mumbai, 8 Nov 2023: Association of Mutual Funds in India (AMFI) announced the appointment of its new Chief Executive, Mr. Venkat Nageswar Chalasani.
What are the best mutual fund in India? ›
List of Best Mutual Funds in India sorted by ET Money Ranking
- HYBRID Equity Savings. ...
- HYBRID Conservative Hybrid. ...
- ICICI Prudential Credit Risk Fund. ...
- ICICI Prudential All Seasons Bond Fund. ...
- ICICI Prudential Medium Term Bond Fund. ...
- ICICI Prudential Floating Interest Fund. ...
- SBI Magnum Income Fund. ...
- Nippon India Corporate Bond Fund.
As a key industry organisation, AMFI promotes transparency among fund houses and fosters a high-trust environment that enables citizens to participate in financial markets more efficiently. Through its progressive standards, AMFI works to create a safe and fair investment landscape for all.
What is the difference between SEBI and AMFI? ›
AMFI and SEBI (Securities and Exchange Board of India) are distinct entities in the Indian financial market. AMFI is an industry association representing mutual fund companies and working towards industry development. Conversely, SEBI is the overall regulator of the securities market, including mutual funds.
Are mutual funds regulated by RBI? ›
Mutual funds in India are regulated by the Securities and Exchange Board of India (SEBI). All the mutual funds are registered with SEBI. They function within the provisions of strict regulation created to protect the interests of the investor. In 1996, SEBI formulated the Mutual Fund Regulation.
Are all mutual funds regulated by SEBI? ›
All mutual funds are required to be registered with SEBI before they launch any scheme. What is Net Asset Value (NAV) of a scheme? The performance of a particular scheme of a mutual fund is denoted by Net Asset Value (NAV). Mutual funds invest the money collected from the investors in securities markets.
The Securities and Exchange Board of India looks after the mutual funds in India. SEBI regulates India's securities market, including mutual funds. Established in 1988, it derived its powers from the Securities and Exchange Board of India Act 1992.
How many AMFI distributors are there in India? ›
The MF industry welcomes over 23,000 new individual MFDs in FY 2023. AMFI data shows that 23,300 individuals have become mutual fund distributors last financial year.
Who holds mutual funds in India? ›
Top Mutual Fund Houses in India
| S.No. | Mutual Fund House |
|---|
| 1. | SBI Mutual Fund |
| 2. | ICICI Prudential Mutual Fund |
| 3. | HDFC Mutual Fund |
| 4. | Aditya Birla Sun Life Mutual Fund |
6 more rowsMay 16, 2024
The Association of Mutual Funds in India is a non-profit government organisation in the Mutual Funds' sector that acts as a primary regulator under SEBI.
Who is trustee of mutual fund in India? ›
Every mutual fund must have a minimum of 4 trustees or they can appoint a trustee company with minimum of 4 directors. Two-thirds of the trustees will have to be independent. Also, trustees cannot be appointed from within the same group to which the AMC belongs.
What regulates mutual funds in India? ›
The Securities and Exchange Board of India (SEBI) oversees mutual funds in India, ensuring they operate fairly and efficiently. SEBI's mandate encompasses overseeing mutual fund operations, from formation to administration, setting a framework to protect investor interests, and ensuring market integrity.
Which is the largest mutual fund organization in India? ›
List of Top Asset Management Companies in India 2024
- SBI Mutual Fund. ₹ 919,519.99 crore.
- ICICI Prudential Mutual Fund. ₹ 716,867.52 crores.
- HDFC Mutual Fund. ₹ 614,665.43 crores.
- Nippon India Mutual Fund. ₹ 438,276.85 crores.
- Kotak Mahindra Mutual Fund. ...
- Aditya Birla Sun Life Mutual Fund. ...
- UTI Mutual Fund. ...
- Axis Mutual Fund.
How many asset management companies are there in India? There are forty-four registered asset management companies in India. These companies manage investors' funds - invest in various securities to generate optimal returns. Always check the registration and track record of the AMC company before you invest.
