What is the Role of AMCs in Mutual Funds?
January 28, 2022 (Investorideas.com Newswire) Could mutual funds be the alternative word for investment? Sure looks like it. Now all comments apart, it has really been turning heads - mutual funds. But why? This is because mutual funds have been a viable option for all generations, irrespective of age groups or income. Who wouldn't want to invest when all you have to do is invest as little as you can. Even if that is just Rs. 100. Saving is a different deal, but investing grows your money, and it lets your money work for you instead of the other way around.
Apart from these factors, there is one more reason why mutual funds have taken a big hit. That's because of the rising number of AMCs, AMCs mean the asset management companies. Here we are going to talk about the asset management companies in our country and what role they play in mutual funds.
What are Asset Management Companies?
Asset management companies are firms that invest pooled funds from clients, putting the capital to work through various investments including stocks, bonds, real estate, and much more. With high net worth individual portfolio's, they also manage hedge funds and pension plans. They mostly serve smaller investors by creating pooled structures like mutual funds and ETFs, which are managed by a centralised portfolio.
These firms are generally distinguished by their assets under management and the number of assets they manage.
They are also referred to as money management firms that offer public mutual funds and ETFs. Some of these firms, for example, are Fidelity Investments, Franklin Templeton India, Vanguard Group, and much more.
Growth of Asset Management Companies in India
There aren't one or two asset management companies in India, but quite a lot of them. Why is this stream so fast-growing? Have you ever wondered? This industry stands at the end of the fundamental shifts that shape the future. Most of them have bought themselves time to bring the future into focus and are setting a brave new world. The operating structures and asset managers are setting the landscape for more investments and growth.
While there was a time that people feared trusting third parties with money, investments, and trading, here we see a new change being set by AMCs. Giving them a great growth opportunity with new operating models and people for the change ahead.
Role of Asset Management Companies with Mutual Funds
As you know, an asset manager makes the decisions and moves for the investor in AMCs. In a broad sense, they manage your portfolio. Let's look at the role of an AMC in terms of mutual funds.
The construction of the portfolio in-depth and picking assets on the prevailing Market from a micro and macro perspective.
2. Construction of Mutual Fund Portfolio
The construction of the portfolio is done through defining investment objectives or rationale. The motive of the AMC is to generate more returns than the benchmark. The managers take the market findings and start crafting fund schemes and portfolios.
3. Allocation of Assets
The mutual fund objectives get fixed. The asset needs to be allocated according to the investment rationale. After the broad asset class allocation, the process now comes down to selecting assets of different types to achieve the desired return.
The AMC constantly monitors the performance of the fund's scheme. It is essential in order to be better than the competitors.
Markets aren't stable all of the time - that's why, if a stock has been allotted and it is not performing well, it has to be re-allocated. This is a crucial process and also defines the expertise of the fund manager.
How to Choose an AMC?
Here are some factors you need to consider before selecting an AMC to start investing:
1. The Reputation: A fund house doesn't earn status in a day - it takes months or even years. An AMC gets a good reputation after consistently performing for 5 to 10 years.
2. Reviews: You need to talk to other investors and analyze the past performance and if it has been constant. You can also find out if there are any grievances against the AMC.
3. The Fund Manager: You need to check the track record of the fund manager and style of investment. There are several mutual fund schemes, and their performance is dictated by the investment style and skill of the Manager. You shouldn't invest in a fund if you aren't comfortable with the investment style box to an asset you gauge the investment style of the management.
Once you have found your perfect AMC, you can get all ready to start your investment journey.
If you have been thinking about investing in mutual funds through AMCs, that's a great thing to do. We all know how hard it is to invest in individual funds, and also how much we put at stake, and as a beginner or risk-averse individual, mutual funds are a great idea.
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