Advantages And Disadvantages Of Mutual Funds

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3.1INTRODUCTION: The fund is essentially a corporation whose sole business is to collect and invest money. You join the pool by buying shares in the fund. Your money is then invested by a team of professionals, who research stocks, bonds or other assets and then place the money as wisely as they can. There are several flavors of mutual funds. Funds that impose a sales charge taking a cut of any new money that comes into the fund, or a cut of withdrawals are called load funds; those that do not have sales charges are called no-load funds.
Funds can also be divided into open- and closed-end funds.
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The stocks these mutual funds have are very fluid and are used for buying or redeeming and/or selling shares at a net asset value. Mutual funds posses shares of several companies and receive dividends in lieu of them and the earnings are distributed among the share …show more content…
In fact, since the tax is on distributions, it makes income schemes less attractive in comparison to growth schemes, because the objective of income schemes is to pay regular dividends. The fund cannot avoid the tax eve if the investor chooses to reinvest the distribution back into the fund. For example, the fund will still pay Rs. 10.20 tax on the announced distribution, even if the investor chooses to reinvest his dividends in the concerned scheme.
As per SEBI Regulations on Mutual Funds, an investor is entitled