Jan. 28, 2008
-- The stocks mutual funds are operated by a fund manager, who deploys the fund in the markets on behalf of the fund investors. The mutual funds are normally managed by a bank or non-banking entity on behalf of the investors. Every time, a scheme is announced there are plenty of investors keen on parking their funds in a safe mode. Mutual funds are basically aimed at helping each other. The fund manager seeks investment from like minded persons, who will go through the offer document carefully before making the investments. The terms and conditions of the stocks mutual funds have to be spelt out clearly for the benefit of the investors. The fund manager seeks closed ended and open ended investments from the investors. The mutual funds have exposure to various markets. The stocks mutual funds, especially assure maximum returns to the investors. Therefore, the demand for stock mutual funds is greater. Though it is risky to operate in stocks mutual funds where the entire net base could be wiped out due to volatility of the market, people are continuing to show confidence in the stocks mutual funds market.
Before investing in stocks mutual funds, care should be taken to ensure that adequate investments are made. Also, read the offer document carefully. Go through the provisions provided for the repayment option also. Normally, the returns for investments in stock mutual funds are higher. Therefore, large sums of money enter the mutual funds. Sometimes, apart from the routine returns guaranteed, additional pay outs are made to the customers, depending on the performance of the mutual funds in the stock markets. No other mutual funds offer this unique option to the customer. It is a critical option that has become popular because of the additional pay out. The practice of additional pay out is a recent one with many stock mutual funds promising more than what has been given in the offer document. While investing in stocks mutual funds, check the closing date of the mutual funds. If the closing date of the mutual funds prescribe that the pay out will be variable depending on the performance of the mutual funds, opt for it. Under the variable pay out scheme, the returns could be higher. There is another option called fixed income scheme. Irrespective of the performance of the mutual funds in the stock markets, a minimum specified amount will be returned to the customer. Unlike variable pay out, there is no risk of losing the money. Opting for a variable pay out is like a gamble, but very often people prefer it since the returns are higher when compared to the fixed income scheme.
Always consult a tax expert before making investments in the stocks mutual funds. It is also necessary that a person keeps a close eye on the stock markets. People not familiar with the stock markets may keep clear of the stocks mutual funds.
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