So..when was the last time you saw a 'disclaimer' crop up in a television commercial quoting a trite statement "Mutual funds are subject to market risk. Please read the offer document carefully before investing." ? Perhaps yesterday..or may be an hour back.
So what does this statement connote ? Well the answer will be dealt with in the next few lines. Read on...
Suppose a middle class service man with a monthly income of around Rs.25K, thinks of investing in the share market, with the inherent fear of the stocks crashing and him losing his hard earned money. Such investors whose "risk tolerance" is low retort back to a well diversified investment portfolio. It is this diversified investment portfolio that brings MUTUAL FUNDS ( also called ASSET MANAGEMENT COMPANY [AMC] ) in the picture.
WHAT IS AN AMC ?
An asset management company pools money from investors and invests it in a portfolio on behalf of the investors. The money pooled in is the "mutual fund", which is invested in various asset classes like equity, bonds, debentures (to be explained in the next few posts).
The AMC is responsible for investing the pooled money into specific securities. The AMC constantly tracks and monitors the market trends and manages the funds, leading to low risk and hopefully quashing the fear of losing ones money in the "not so predictable" market.
ICICI Prudential Asset Management Co. Ltd., is an example of an AMC.
Different kinds of funds are available viz. Hedge funds, sector funds, debt fund etc, the details of which are beyond the colloquial approach that I'm sticking to !!
So what does this statement connote ? Well the answer will be dealt with in the next few lines. Read on...
Suppose a middle class service man with a monthly income of around Rs.25K, thinks of investing in the share market, with the inherent fear of the stocks crashing and him losing his hard earned money. Such investors whose "risk tolerance" is low retort back to a well diversified investment portfolio. It is this diversified investment portfolio that brings MUTUAL FUNDS ( also called ASSET MANAGEMENT COMPANY [AMC] ) in the picture.
WHAT IS AN AMC ?
An asset management company pools money from investors and invests it in a portfolio on behalf of the investors. The money pooled in is the "mutual fund", which is invested in various asset classes like equity, bonds, debentures (to be explained in the next few posts).
The AMC is responsible for investing the pooled money into specific securities. The AMC constantly tracks and monitors the market trends and manages the funds, leading to low risk and hopefully quashing the fear of losing ones money in the "not so predictable" market.
ICICI Prudential Asset Management Co. Ltd., is an example of an AMC.
Different kinds of funds are available viz. Hedge funds, sector funds, debt fund etc, the details of which are beyond the colloquial approach that I'm sticking to !!
No comments:
Post a Comment