What are Investment Objectives of Mutual Funds
- M Manohar Rao
- Jul 10
- 3 min read
Tags: Wealth Management, Investment Lesson, Mutual Funds, Mutual Fund Basics, Stock market, Budget, Finance, Investing, Personal Finance, Investment, ETFs, SIP, Multi cap
Mutual funds seek to mobilize money from all possible investors. Various investors have different investment preferences and needs. In order to accommodate these preferences, mutual funds mobilize different pools of money. Each such pool of money is called a mutual fund scheme.
Every scheme has a pre-announced investment objective. Investors invest in a mutual fund scheme whose investment objective reflects their own needs and preference.
The primary objective of various schemes stems from the basic needs of an investor, viz., safety, liquidity, and returns. Let us look at some examples of investment objectives (Table below), as taken from the scheme information documents of certain mutual fund schemes.
Examples of Investment Objectives
As can be seen from the above examples, the investment objectives are a combination of safety, liquidity, and returns (be it regular income or long-term capital appreciation).
It is in line with these objectives that the scheme would decide the investment universe i.e., the types of securities to invest in. As discussed in the previous chapter, different asset classes serve different purposes. Exactly, in the same way, the schemes that seek liquidity invest in money market securities, and those seeking capital appreciation invest in equity.
Mutual fund schemes are often classified in terms of the investment objectives, i.e., what they aim to achieve; and often in terms of the investment universe, i.e., where they invest. As can be seen from the discussion above, there is a very close relation between the two types of classifications.
The money mobilized from investors is invested by the mutual fund scheme in a portfolio of securities as per the stated investment objective. Profits or losses, as the case might be, belong to the investors or unitholders. No other entity involved in the mutual fund in any capacity participates in the scheme’s profits or losses. They are all paid a fee or commission for the contributions they make to launching and operating the schemes, and other related tasks.
Disclaimer:
The information set out above is included for general information purposes only and is not exhaustive and does not constitute legal or tax advice. All complaints regarding Mutual Fund can be directed towards visit www.scores.gov.in (SEBI SCORES portal). Readers are requested to make informed investment decisions and consult Chaitanya Financial Consultants – 9000628943 / mfd.mmr@gmail.com to determine the financial implications with respect to investing in Mutual Funds.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
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