What are the different options and value added services available to the investors?

Q6.

What are the different options and value added services available to the investors? Options and Value Added Services Mutual funds due to the increased competition offer various options and value added services to attract and retain customers Options: The options available to the investors are dividends payout option, dividend reinvestment option and growth options, systematic investment plan, systematic transfer plan and systematic withdrawal plan. Dividend Payout Option: Under this scheme, the dividend declared by the scheme is paid in cash to the investor. Dividend reinvestment Option: Under this scheme, the dividend declared by the scheme is ploughed back into the scheme at the applicable NAV. Growth Option: Under this scheme, no dividend is paid and hence the gains of the scheme gets reflected in the NAV of the scheme Systematic Investment Plan (SIP): Under this scheme the investor can invest regular sums of money every month to buy units of a mutual fund scheme. As the investment is made regularly, the investor buys more units when the price is low and fewer units when the price is high. this process is known as rupee cost averaging. Systematic transfer plan: Under this scheme, an investor invest a lump sum money in the liquid scheme and opt for systematic transfer plan (STP) wherein a predetermined amount of money will be transferred from liquid scheme to the equity scheme. The benefit of this is, until it is transferred the investment earns a post-tax rate comparable to a deposit in a bank account Systematic Withdrawal Plan: This scheme allows the investor to withdraw a fixed amount every month. The mutual fund sends the redemption proceeds to the investor every month automatically. The investor can opt for a fixed sum every month or a certain percentage of the capital appreciation in the NAV of the scheme. Value Added Services Mutual funds offer value added services like redemption over phone, triggers and alerts, cheque book facility and new points of purchase. A trigger is an actionable facility that lets the investor pre-specify exit targets for his mutual fund investments. Generally triggers are based on the value of the NAV or after a specified date. When the target is reached, the fund house will automatically redeem the units of the investors. For the convenience of their investors, fund houses are supplementing traditional channels of distribution with more points-of purchase (POP). For examples HDFC Mutual fund allow investors to buy and sell units through ATMs.  Mutual funds are associations or trusts who wish to make investments in the financial instruments for the mutual benefit of its members. · The mutual funds uses qualified portfolio managers to invest in a portfolio of securities who analyzes economic and industry trends and forecasts and assess the potential impact of various conditions on companies. · Open ended funds are open to investment from investors at any time. Investors can purchase shares directly from the open-ended fund at any time. In addition, investors can sell (redeem) their shares back to the open-ended at any time. · Money Market Funds invest in securities of a short-term nature, which generally means securities of less than one-year maturity. The typical, short-tern, interest-bearing instruments these funds invest include Treasury Bills issued by governments, Certificates of Deposit issued by banks and Commercial Paper issued by companies. · An investor can buy or redeem units the fund itself at a price based on the net asset value (NAV) per unit. NAV per unit is obtained by dividing the amount of the market value of the fund’s assets (plus accrued income + receivables + accrued income minus the fund’s liabilities – accrued expenses) by the number of units outstanding. · Mutual funds offer value added services like redemption over phone, triggers and alerts, cheque book facility and new points of purchase.