Money Market Fund
• Money market funds provide easy liquidity, preservation of capital and moderate
income. They are low risk as they invest in safer, shortterm money market instruments
such as Treasury Bills, Certificates of Deposit, Commercial Paper and InterBank Call
Money. Returns on these schemes may fluctuate, depending upon the interest rates
prevailing in the market.
• Gilt fund invest much of their corpus in sovereign securities issued by the Central
Government, with a very small portion invested in the InterBank Call Money market. All
these instruments carry the highest credit rating, thus providing the highest level of safety.
The default risk in these instruments is virtually zero. Regulations in force now, permit
nonGovernment Provident Funds, Superannuation Funds and Gratuity Funds to invest in
100% Gilt schemes floated by Mutual Funds.
• A Bond Fund is a different form of an Income Fund, with the only difference being that
the entire corpus is invested in bonds. Unlike some income funds, no portion of the
corpus is invested in equities. Thus, the returns on a Bond Fund will generally vary less
than the returns on an Income Fund that may have a 1015% equity component.
• An Index Fund is a fund that has the objective of tracking one of the popular stock
market indices. Thus, the returns on an Index Fund will approximate the changes in the
index that is used as the base. Of all the investment options, an Index Fund is one of the
more passive avenues.
• When Units are purchased in an initial offer, they are priced at par value normally
Rs 10 per unit. A load factor is usually incorporated if it is a equity fund or the bulk of
investments are in equity.
• When units are purchased at a time other than the initial issue, the purchase price is the
Net Asset Value (NAV) plus (wherever applicable) a frontend load.
• In the case of a closedend fund, the purchase is based on the price that is being quoted
on the stock exchange where it