The specific characteristics of Indian Mutual Fund Schemes can be narrated as listed below.
- Assurance of minimum returns: In general mutual funds do not assure any minimum returns to their investors. However, Indian Mutual Fund Schemes launched during 1987 to 1990 assured specific returns till 1991, when the SEBI and Union Ministry of Finance order the mutual funds not to assure minimum returns. Recently, SEBI has formulated a policy that, mutual funds with a track record of five years will be allowed to offer fixed returns not exceeding one year period.
- Multiple Options: Most of the mutual fund schemes are offering different options to the investors under one scheme. For example, a growth-oriented scheme may offer the option of either regular income or re-investment of income. Under the regular income plan, dividend shall be distributed to investors, and under the second dividend will be reinvested and total amount shall be paid at time of redumption.
- Lock in Period: Mutual Fund Schemes offer documents that contain a clause of lock-in period ranging from one year to three years. Till the completion of the minimum period the investors are to trade neither the units on the stock exchange nor to avail themselves of repurchase facility.
- Liquidity : Generally open-ended funds offer the facility of repurchase and the close-ended are traded at stock exchange offering repurchase after a minimum lock in period of two to three years. Mutual funds also have a facility to pledge or mortgage at banks to obtain loan and can be transferred in favour of any individual.
- Incentives to early subscribers: Most of the close-ended mutual fund schemes are offering incentives to encourage early subscription to investors. This is more often in the tax planning schemes. For instance, if the scheme is open for a period of three months, the investor may be allowed a deduction from the amount to be invested at a certain specified rate, if the subscriptions were during the specified time limits.
For citing this article use:
- Reddy, V. P. (2010). An Evaluation of the performance of mutual fund industry in India A comparative study of Public and Private sector mutual funds.
- Sadak. H. Mutual Funds in India. Response Books, New Delhi.