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What is the primary responsibility of the sponsor of a mutual fund?
Which of the following roles is responsible for making investment decisions for the mutual fund?
Who holds and safeguards the securities and assets of the mutual fund?
What is a key responsibility of the trustees in a mutual fund?
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What is the role of the Board of Directors of the AMC?
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Which member of a mutual fund is tasked with ensuring compliance with regulatory requirements?
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What is one of the primary responsibilities of the fund manager?
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Why must at least 50% of the Board of Directors of the AMC be independent directors?
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What is the primary focus of compliance checks in a fund?
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Which type of fund invests primarily in large-cap stocks?
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What is a characteristic of mid-cap funds?
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Which type of mutual fund primarily invests in government securities?
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What is the defining feature of balanced funds?
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What type of mutual fund is designed for short-term investments?
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Which of the following funds focuses on specific sectors like technology or healthcare?
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What is the role of fund performance monitoring?
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What role does AMFI fulfill in terms of industry data and research?
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Which of the following advantages of mutual funds primarily contributes to risk reduction?
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What is the primary function of the Grievance Redressal role within mutual funds?
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How does a Systematic Transfer Plan (STP) benefit investors?
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Which feature of mutual funds ensures transparency in their operations?
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What kind of investment options do mutual funds offer?
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What is a key characteristic of professional management in mutual funds?
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Which of the following is NOT considered an advantage of mutual funds?
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What is a primary benefit of rupee cost averaging through a SIP?
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Which feature of SIP encourages a habit of saving and investing?
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Which type of fund primarily invests in equities?
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How does a SIP facilitate convenience for investors?
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What is the primary goal of Target Date Funds?
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What flexibility does a SIP provide to investors?
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How do ETFs primarily differ from traditional mutual funds?
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What is one disadvantage of not using a SIP for investments?
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What is the main function of AMFI in the mutual fund industry?
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What do Liquid Funds primarily focus on?
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How do SIPs support long-term wealth accumulation?
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Which statement reflects a common misconception about SIPs?
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International Funds are designed to offer investors what advantage?
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What type of funds typically have lower expense ratios?
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What initial amount is commonly required to start investing in a SIP?
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Which of the following is a key role of AMFI regarding mutual fund distributors?
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Study Notes
Meaning of Mutual Fund
- A mutual fund is an investment vehicle that pools money from multiple investors to create a diversified portfolio of various securities including stocks, bonds, and money market instruments.
Key Members of Mutual Funds
Sponsor
- Initiates the mutual fund and provides initial capital.
- Responsible for establishing the mutual fund and setting up the Asset Management Company (AMC) and trust.
Trustees
- Hold assets in trust for unitholders and oversee AMC operations.
- Ensure compliance with SEBI regulations while acting in the best interest of investors.
Asset Management Company (AMC)
- Manages the mutual fund’s investments and daily operations.
- Conducts research to make informed investment decisions and ensures regulatory compliance.
Board of Directors (AMC)
- Governs the AMC with strategic oversight and ensures compliance with regulations.
- Must have at least 50% independent directors to maintain objectivity.
Fund Manager
- Responsible for making investment decisions, selecting, and managing the fund's investments.
- Communicates fund performance to investors and adjusts portfolio as market conditions change.
Custodian
- Safeguards and maintains the records of the fund’s securities and assets.
- Ensures compliance with investment mandates and regulations.
Fund Performance Monitoring
- Involves assessing performance against benchmarks and adapting strategies based on market conditions.
Record Keeping and Reporting
- Maintains detailed transaction records and prepares regular financial statements for investors.
Fund Launch and Development
- Includes designing new fund schemes and developing innovative investment products.
Types of Mutual Fund Schemes
Equity Funds
- Large-Cap Funds: Invest in large-cap stocks, typically less volatile.
- Mid-Cap Funds: Focus on mid-sized companies, offering higher growth potential with increased risk.
- Small-Cap Funds: Invest in smaller companies with high growth potential but higher risk.
- Sectoral/Thematic Funds: Target specific sectors like technology or healthcare.
- Dividend Yield Funds: Focus on companies with high dividend yields.
Debt Funds
- Short-Term Debt Funds: Invest in short-term fixed-income securities for short-term goals.
- Long-Term Debt Funds: Offer stable returns through long-term fixed-income securities.
- Liquid Funds: Invest in very short-term instruments and are ideal for temporary cash parking.
- Gilt Funds: Invest primarily in government securities regarded as low-risk.
Hybrid Funds
- Balanced Funds: Mix of equity and debt for balanced risk and return.
- Aggressive Hybrid Funds: Greater emphasis on equities.
- Conservative Hybrid Funds: Predominantly invests in debt.
Index Funds
- Track specific indices like Nifty 50 or Sensex, aiming to replicate their performance with lower fees.
Exchange-Traded Funds (ETFs)
- Trade on stock exchanges, providing liquidity and tracking various indices or sectors.
International Funds
- Invest in foreign markets for global equity exposure and diversification.
Liquid and Money Market Funds
- Liquid Funds: Focus on short-term quality instruments.
- Money Market Funds: Invest in high-quality short-term debt instruments.
Objectives of AMFI
- Represents the mutual fund industry in India and voices concerns to regulators and policymakers.
- Promotes mutual fund awareness and educates investors about their benefits through initiatives.
- Develops best practices and ethical standards for mutual fund companies.
Advantages of Mutual Funds
- Diversification reduces risk associated with individual securities.
- Professional management by experienced fund managers enhances investment potential.
- High liquidity allows units to be bought or sold at the current Net Asset Value (NAV).
- Accessible with small initial investments catering to a diverse investor base.
- Transparency ensured through regular disclosures and reporting mandated by regulators.
- Convenience in managing investments, ideal for novice investors.
Systematic Transfer Plan (STP)
- Allows the regular transfer of fixed amounts or units from one scheme to another within the same fund family to manage risk efficiently.
Systematic Investment Plan (SIP)
- A disciplined investment method where investors invest a fixed amount periodically, beneficial for averaging costs through market fluctuations.
- Offers flexibility, encourages disciplined saving habits, and compounds investment growth over time.
- Convenient setup and management make SIPs appealing to a wide range of investors.
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Description
This quiz explores the concept and key members involved in mutual funds. Learn about the roles of sponsors, trustees, and asset management companies in the investment framework. Test your knowledge on how these elements work together to benefit investors.
