Automatic reinvestment plan, Financial Management

Automatic Reinvestment Plan

Like in the US, UTI India has also started this plan where the amount of dividend and other income accrued on mutual fund investments is automatically reinvested in purchasing additional units or shares in the open-ended funds. Other Mutual Funds in the public sector have followed suit.

Regular Income Plan

Investors enjoy Systematic withdrawal of their money locked in mutual fund investments in the form of regular income by way of monthly or quarterly installments to meet their regular financial needs. Initial investment in such plans is stipulated which carries interest at the specified rate. The repayment installments are so formulated as to pay out the earnings first and then the principal amount.
Shifting Advantage or Conversion Privileges

Many mutual fund companies offer different investment plans for investors and many provide the facility to investors within the family of the plans to shift or convert or exchange them afterwards from one plan to another at nominal costs or at no costs subject to tax advantages, if any, available to the investors.

Retirement Pension Plans

Mutual Funds are now very much linked with retirement pension plans. They facilitate setting up by individuals and companies, the tax deferred retirement plans for self or their employees respectively. Regular monthly income plans in India offered by UTI and other Mutual Funds established by nationalized banks are alike.

Insurance Plan

Mutual Funds offer in the USA a relatively new service in the form of insurance program that protects an investment in mutual fund against a long-term loss. The insurance cover is available for a period ranging from 10 to 15 years, for the amounts ranging from Rs.3,000 to Rs.2,00,000 at a premium of about 6% of the insured sum for a period of 10 years. In dollar terms the insurance of a sum of Rs.1,00,000 will cost Rs.600 for a period of 10 years. One has to assess the loss on the insured sum. Capital loss of Rs.10,000 will be completely met by insurance company to cover up the insurance sum of Rs.1,00,000.

In India, LIC Mutual Fund and UTI have come out with schemes providing life insurance covers to the investors.

Cheque-writing Facilities

In the USA, all Mutual Funds offer to the investors the facility to draw the money invested in Mutual Funds. These cheques are drawn and paid through the funds' banks. This service is rendered frequently by all the Mutual Funds in the USA. In its mid-term review of monetary and credit policy for 1999-2000, the RBI permitted Money Market Mutual Funds (MMMFs) to offer cheque writing facility to the unit holders. In response, some Mutual Funds introduced limited cheque writing facility by allowing their unit holders to issue cheques against a savings account with a designated bank. This policy permitted scheduled commercial banks to offer "cheque writing" facility to Gilt Funds and those liquid income schemes of Mutual Funds which predominantly (not less than 80% of the corpus) invest in money market instruments.

To conclude, real service to investors is done by Mutual Funds by offering the schemes which directly offer income, capital gains and solutions to their personal individual problems. For this purpose, Mutual Funds should maintain a marketing research wing always looking for new opportunities and conceiving innovative schemes to meet the conceptual needs of the investors apart from systematic income and gains in money terms.


Posted Date: 9/11/2012 1:10:29 AM | Location : United States

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