A mutual fund is a professionally managed company that collects money from many investors and invests it in securities such as stocks, bonds and short-term debt, equity or bond funds and money market funds.
Mutual funds are a good investment for investors looking to diversify their portfolio. Instead of betting everything on one company or sector, a mutual fund invests in different stocks to try to minimize portfolio risk.
The term is typically used in the US, Canada and India, while similar structures around the world include the SICAV in Europe and the open-ended investment firm in the UK.
What is the minimum and maximum mandate I can invest in mutual funds?
“The minimum mandate for investments in mutual funds is one day and the maximum tenure is ‘perpetual’.”
It can be easy to figure out the minimum period of one day, i.e. getting units assigned to a particular NAV and then redeemed at the next day’s NAV. “However, what is the ‘perpetual’ nature of maximum possession?” There are open end schemes in India with daily NAV, in existence for more than 20 years. And there are also investors who remained invested for that term! As long as the schemes continue to work and offer a sell and buy price based on NAV, investors can choose to continue to stay invested. An open-ended fund can continue to exist until the house of the fund decides to terminate it, after obtaining the necessary approval of the trustees.
