Mutual fund products for the new cadre of distributors

Mutual Fund Products for New Cadre of Distributors

The following are key concepts related to mutual fund products for the new cadre of distributors:

Liquid Schemes / Money Market Schemes: These are open-ended debt schemes that invest in debt and money market securities with very short maturities, making them low-risk funds suitable for short-term parking of surplus money.
Index Funds: These are open-ended schemes that replicate a specific index, with at least 95% of assets invested in the constituents of the index, making them a simple way to take exposure to a market or segment.
Diversified Equity Schemes: These are mutual funds that invest across a wide spectrum of companies, reducing the risk of owning one company's share or the risk of owning shares of companies from one industry.
Retirement Benefit Schemes: These are open-ended retirement solution-oriented schemes with a lock-in of 5 years or till retirement age, offering tax benefits and designed to create a retirement corpus.
Fixed Maturity Plans (FMPs): These are close-ended debt funds with a duration of the investment portfolio closely aligned to the maturity of the scheme, providing clarity on likely returns and relatively easy to estimate returns.

Key characteristics of these products include:

Low Risk: Liquid schemes, money market schemes, and FMPs are considered low-risk funds.
Passive Management: Index funds are passively managed, with a low total expense ratio (TER).
Diversification: Diversified equity schemes reduce risk by investing across a wide spectrum of companies.
Tax Benefits: Retirement benefit schemes offer tax benefits under Section 80C of the Income Tax Act.
Lock-in Period: Retirement benefit schemes have a lock-in period of at least 5 years or till retirement age.