Hello. My name is Sandeep and you are very welcome on my blog. this too is going to be a little passion. We've had a lot of mutual funds information. If you have interest within the stock market, how to analyze stocks, select, then definitely subscribe to our basic plan. In this particular article, we are going to talk about the limitations of mutual funds in particular, now see that when it comes to major funds, often a line is spoken inside what you must have heard on TV and radio today. "Mutual Funds and Subject to Market Risk Please Read all Document Carefully Before Investing". If the line is spoken so fast and at the same time we have become so used to listening, we ignore it and the market price So often people also understand that today some money is being invested inside the stock market, so you are a little more right. It is ours but within the long term and definitely make money, but there are some limitations which we do not understand upfront, then I will talk about few such money in sweet, if you want to understand me better. So it is very important to understand these few things too, let's start.
Apart from this, we have a very common query that if we want to invest or create in the state, then we should bring demat and cash for that, then I comment on it. You can get your account opened with any discount broker where you should stop. Very less and the delivery charges are given immediately, let's proper, recommendation and like demat account you should get the work done.
let us talk about the first limitation of Major Fund. Like I said earlier, it is necessary to read the open document of production a little bit carefully, so there is also a mention inside your document that how much cash position a mutual fund will maintain and average and how much money it will keep inverted in the market. Right now the cash position is maintained because suppose there are few investors like you and me. After three years and four years, we have a requirement of some money and we want to withdraw that money, then for such investors that money is kept for redemption and this citizen is kept only approx 2 to 5 percent.
Investment will remain the same. Inside the market, but sometimes if the fund manager wants, he can increase the position because he thinks that if there is only a few opportunities inside the stock market. That is, there is a possibility of falling in the price of some stocks. How can he keep some more money for him, but you will see. Most of the files go up to ten percent only. Do not keep more than 10% of the money in cash. There can be any major every few exchanges that an example is to keep upto 20% cash in the name of liquid fund. That's because people invest in them for short term. The meaning of liquid fund is that it is being invested in short term security, but if we talk wildly, which are general equity funds, only fiber ten percent of the money is kept in cash. Now it has advantages as well as disadvantages. The advantage is that if the market rises and all the money is invested, then that fund will get good returns, but if the market falls then the buying opportunity that comes is almost over with the mutual fund, so in the meantime we have to Will understand a little business. Where does the money come from Major Funds, what do we invest more than people like us, when the market gets up, help is there today, when many people become interested. More money starts coming in mutual funds. Market NAV would have gone up if more money came.
If the fund does not want to keep much money in cash, then it will put all the money inside the stock market. If you put it inside the stock market, then because the stock market is high pay, then it will buy the stocks high. That is, if the price of the land has increased, then by design itself, he will have to buy it in a slightly higher amount and the second major fund, he has to withdraw less and more money from the stock market. When people take More money inside the major fund if the economy continues to go down. If you start withdrawing money from the very bottom, then how much money will they increase in mutual funds from the stock market, then because the market has fallen. If the market money is also going, then money has to be withdrawn in mutual funds too, so in a way by design, you can understand that there is a limitation of mutual funds that even when they are looking for the stock market, they have to keep investing. Other Retail Investor You and I have the advantage that we can hold cash and hold it for as long as we want, but mutual funds because the mandate is such that they have to invest money, then if we look at the fund Now let's talk about the other limitations, which is the problem of big money, now mutual funds have more money in one. To manage or invest that itself becomes a problem for them. Infact when a major fund goes too big at times. If so, it is also closed sometimes.
But what is this problem? Now look, Sometimes it matches inside a big company, it would have survived, but there is also this problem inside. you have probably quoted somewhere that a small investor can earn more than 50% return, you can see many people near you. difference was that you may knows more than half a dozen people who have more than 50% return have the ability to earn. If you devotes your entire intelligence to him and spends your time, then if you managing a million dollars company. But if they are managing a hundred million dollars and managing one billion dollars, then it will be very difficult for them too and what will happen. We understand this. See when a mutual fund has to invest thousand crore two thousand crore 10,000 crore. If it finds a small company that can grow a lot, but when the base is small, a small company has a lot of scope for growth. So if mutual funds start investing thousand crores in it. Inside the company and the total value of that company is 200 crores if it runs, then he cannot do it and let's say. If the valuation of that company is 200 crores. He put 100 crores in that only.
If it gives, then it is directly seen fifty percent with it, then no mutual fund wants to become a majority holder but this limitation is not with a retail investor. We believe that investors like you and me can analyze on their own stocks apart from high expense ratios and sales charges, management abuses, tax inefficiency, and poor trade execution.
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