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Chapter

Mutual Fund Units

Who issues the Mutual fund units?

It is issued by Mutual Funds

Who can invest in mutual funds?

Institutions and Individual can invest in mutual funds

What is the medium of issue?

Direct issuance by mutual funds and Stock Exchange is done

Which is the regulatory body?

SEBI & RBI is the regulatory body

Mutual Funds (MFs) are investment that group together the money contributed by investor which the fund invests in a portfolio of securities that mirror the common investment purpose of the investors. Every investor’s share is represented by the units proceeded by the fund.

The value of the units, called the Net Asset Value (NAV), changes constantly to mirror changes in the value of the portfolio held by the fund.

MF methods can be categorized as open-ended or close-ended. An open-ended scheme offers the investors an option to buy units from the fund at any time and sell the units back to the fund at any time.

These methods do not have any fixed maturity period. The units can be bought and sold anytime at the NAV linked prices.

The unit capital of closed-ended funds is fixed and they sell a specific number of units. Units of closed-ended funds can be bought or sold in the Stock Market where they are mandatorily listed.

Exchange Traded Funds (ETFs)

Who issues the exchange traded funds?

Mutual Funds issue the ETFs

Who can invest in ETFs?

Institutions and Individuals can invest in ETFs

What is the medium of issue?

Direct issuance by mutual funds and Stock Exchange is done

Which is the regulatory body?

SEBI, &RBI regulates the ETFs

Exchange Traded Fund (ETF) is an investment medium that invests funds collectively by investors to follow an index, a commodity or a basket of assets.

It is similar to an index fund in the way that its portfolio mirrors the index it tracks. However, unlike an index fund, the units of the ETF are listed and traded in demat form on a stock exchange and their price alters continuously to mirror changes in the index or commodity prices.

ETFs provide the diversification benefits of an index fund as well as the service to sell or buy at real-time prices, even one unit of the fund.

Since an ETF is a reflexively managed portfolio, its expense ratios are typically lower than that of a mutual fund scheme.

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