Nowadays, mutual funds are very popular. As you know, mutual fund pools money from the investors and invests in shares, bonds, government securities etc. The company which manages the functioning of the mutual fund is called AMC. Want to know more about AMC and its working? Here, is the complete details regarding AMC.
AMC is abbreviated form of Asset Management Company. Based on your investment goals, AMC or the fund house pools money from the investors and invests in various asset markets like stocks, equities shares, securities etc. The fund manager of the AMC takes the investment decision as in where to invest the money based on the investment goal of the investors. The money will be invested in debt, equity or money market by evaluating various parameters like- industry risk, market risk etc. The objective of an AMC is to generate wealth and yield higher return by taking least possible risk.
How AMC manages the funds?
AMC pools a huge amount of money from its investors and invests accordingly based on common investment objective. So, AMCs have a huge pool of resources as compared to individual investors. So, there is client diversification in an AMCs. Also, if you are an individual investor, you need to invest more than investments through AMC. The AMCs or the fund house takes care of your investment. So, you need not have to take any headache regarding your investment strategies.
Now we will discuss how AMC manages the funds.
- Allocation of Asset To achieve your investment goal, the most important part is allocation of your asset. A certain investment objective is always set for a mutual fund. Based on the investment objective, the fund manager of an AMC takes the decision of where and how much to invest in the market. Lets take an example to make it more clear. The fund manager invests 60% assets in equity instruments for a balanced fund, whereas invests not more than 20% assets in equity instruments for a debt fund.
- Performance To give you a regular update on your fund’ status, AMCs provide a complete information on your fund’s performance. The regular update includes- NAV details, returns, portfolio details, financial ratios, sales and repurchase of units etc. In this way, the AMCs maintain a healthy relationship with its investors.
- Research Investing in financial market involves a lot of research and analysis on a daily basis. So, to have a clear picture of the market,analysts study both the micro and macro aspects that can affect the fund’s performance. Based on these research and analysis, fund manager finally takes the investment decision with an aim to beat the benchmark index of the fund.
- Portfolio As discussed earlier, the analysts study the market and its trend on a daily basis. Based on these analysis of the market, fund managers build a portfolio to exceed the benchmark return. An experienced fund manager is very much responsible on constructing a good portfolio.
What are the characteristics of an AMC?
Following are some of the characteristics of an AMC-
- Your investment is professionally managed by an AMC’s fund manager. So, you don’t have to take any pain for your investment decision.
- Your fund’s performances and other updates are given to you by the AMCs.
- AMCs reduces your cost for managing your fund as compared to any portfolio management service.
- AMCs provides relatively higher return by taking least possible risks.
- You dont have to take some time out and research on the market trends for your investment decisions. AMCs perform this task on behalf of you.