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3 Tier Structure

1st

Tier : Sponsor2nd Tier : Public Trust3rd Tier : Asset Management Company

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Open ended:An open ended scheme allows the investor to

enter and exit at his convenience, anytime.

The buy / sell of units takes place at the NetAsset Value (NAV) declared by the fund.

Close ended:Restricts the freedom of entry and exit.

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Mutual Funds can be divided into four basiccategories based upon the funds investmentobjective.These categories are:

1. Money Market Mutual Funds2. Stock Mutual Funds

3. Index Funds4. Bond Mutual Funds5. Balanced Mutual Funds

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This is the most conservative type of mutual fund.The goal is to maintain the $1 value of its shares whileproviding income.Invests in high-quality, short-term securities such ascertificates of deposit, U.S. Treasury Bills, and U.S. TreasuryNotes.MMMFs are an appropriate place for savings.These funds have typically offered higher interest rates thanbank savings accounts.Money market mutual funds are not insured by the FDIC.

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Type of fund that invests in stocks.These funds are also known as equity funds.There are many different types of stock mutual

funds.Some of the most common include:Large-cap funds, mid-cap funds, small-cap funds,

income funds, growth funds, value funds, blendfunds, international funds, and sector funds.

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Type of mutual fund that invests in bonds.There are different types of bond mutual

funds.Typically, bond mutual funds have theobjective of providing stable income withminimal risk.

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Short, Intermediate, and Long-Term Bond FundsShort, Intermediate, and Long-Term CorporateBond FundsMunicipal Bond FundsHigh-Yield (junk) Bond Funds

We will talk more about bonds and bond funds laterin this unit of study.

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These are also known as hybrid funds.These mutual funds invest in stocks, bonds,

and money markets.These are very diversified mutual funds. Thestock portion of the fund provides thepotential for capital appreciation, while thebond and money market portion provideincome.

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Association of Mutual Funds in India (AMFI) was incorporated on22nd August, 1995.

(AMFI) modeled on the lines of a Self Regulating Organization(SRO) with a view to 'promoting and protecting the interest ofmutual funds and their unit-holders, increasing public awarenessof mutual funds, and serving the investors interest by definingand maintaining high ethical and professional standards in themutual funds industry'

Association of Mutual Funds India has brought down theIndian mutual fund industry to a professional and healthy marketwith ethical lines enhancing and maintaining standards.

It follows the principle of both protecting and promoting theinterests of mutual funds as well as their unit holders.

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AUM is a term used by financial servicescompanies in the mutual fund, hedge fund,

and money management, investmentmanagement, wealth management, and private banking businesses to gauge how much moneythey are managing. Many financial servicescompanies use this as a measure of successand comparison against their competitors.

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