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
AMFI, the association of SEBI registered mutual funds in India of all the registered Asset Management Companies, was incorporated on August 22, 1995, as a non-profit organisation. As of now, all the 42 Asset Management Companies that are registered with SEBI, are its members.
Is AMFI a self-regulatory organization? ›
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.
How many AMCs are there in India presently? ›
As of October 2023, there are 45 asset management companies of various sizes registered in India.
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 objectives of Association of Mutual Funds in India? ›
The Association of Mutual Funds in India (AMFI) is committed to advancing and maintaining mutual sector standards and promoting the Indian Mutual Fund Industry along moral and ethical lines.
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).
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.
What is the main function of AMFI? ›
The most important role of AMFI in Mutual Fund is to help protect the interest of Indian investors, as well as that of the asset management companies. It also aids in making investments transparent and more accessible to attract more people to it.
Who controls mutual funds? ›
Mutual funds in India are regulated by Securities and Exchange Board of India, the regulator of the securities and commodity market owned by the Government of India, under the SEBI (Mutual Funds) regulations of 1996.
As far as mutual funds are concerned, SEBI formulates policies and regulates the mutual funds to protect the interest of the investors. SEBI notified regulations for the mutual funds in 1993. Thereafter, mutual funds sponsored by private sector entities were allowed to enter the capital market.
Which is the largest mutual fund 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.
Best Fund Managers: 10 fund managers who have generated most wealth for investors in six years
- Rajeev Thakkar. ...
- Shridatta Bhandwaldar. ...
- Vinay Paharia. ...
- Shreyash Devalkar. ...
- Manish Gunwani Age: 51 YEARS | Experience: 28 YEARS. ...
- Neelesh Surana Age: 54 YEARS | Experience: 28 YEARS.
Unit Trust of India (UTI) is the first and most well-known Indian mutual fund. UTI was founded in 1963 by the RBI, under the parliamentary act and operated as per its regulatory supervision. Unit Scheme 1964 was the first program introduced by the UTI.
What is the role of mutual fund association? ›
The Association of Mutual Funds in India (AMFI) is a self-regulatory organization responsible for ensuring the ethical growth of the Indian MF industry while protecting the interests of investors.
Which is the best mutual fund agency in India? ›
Mutual Fund House
- SBI Mutual Fund.
- ICICI Prudential Mutual Fund.
- HDFC Mutual Fund.
- Aditya Birla Sun Life Mutual Fund.
- Kotak Mahindra Mutual Fund.
- Nippon India Mutual Fund.
- Axis Mutual Fund.
- UTI Mutual Fund.
List of Best Mutual Funds in India sorted by ET Money Ranking
- Quant Small Cap Fund. EQUITY Small Cap. ...
- Quant Mid Cap Fund. ...
- Kotak Infrastructure and Economic Reform Fund. ...
- Quant Multi Asset Fund. ...
- ICICI Prudential Value Discovery Fund. ...
- ICICI Prudential Focused Equity Fund. ...
- DSP Healthcare Fund. ...
- Parag Parikh Flexi Cap Fund.
The ARN number is issued by the Association of Mutual Funds in India (AMFI), which is the self-regulatory organization for the Indian mutual fund industry.
