Importance of an AMC in mutual funds
3 min readRegardless of whether you are new to investing or have been investing in mutual funds for a while, you must have come across the term AMC MF several times. AMC in mutual funds stands for Asset Management Company. The AMC pools funds from different types of investors (individual and institutional) and further invests them in securities and capital assets like stocks, bonds, real estate, etc.
The AMC plays a crucial role, and it is important to pick the best AMC for a mutual fund in order to maximize your returns. Read on to know more.
What is the role of an AMC, and why is it important?
An AMC can offer multiple mutual funds schemes, each handled by a specific fund manager. The fund manager takes care of investment decisions on the ground level, and the AMC takes care of bigger investment decisions at a higher level. AMCs are important as they handle critical functions like:
- Market research: It takes in-depth research and analysis to construct a mutual fund’s portfolio. The AMC hires expert analysts that research the market, study every aspect, and make reports that help the fund manager make investment decisions.
- Portfolio construction: The details of the research conducted by analysts form the basis for a risk-adjusted portfolio. AMCs contribute to portfolio construction, and the decision to buy and sell securities is primarily based on the information provided by the AMC.
- Performance review of mutual funds: It is the AMC’s responsibility to review the performance of the mutual fund scheme and provide all unit holders with the same. AMCs publish reports on the purchase and sale of securities. They also share regular reports on the NAV (net asset value), asset allocation, etc. The aim of the AMC is to outdo competitors and deliver better returns than the market to investors. Performance reviews help them achieve this.
- Asset allocation: The AMC in mutual funds is responsible for selecting appropriate assets for investments as per the fund’s objective. For instance, in a debt fund, the majority of assets are placed in bonds and fixed income securities and a very small portion in equities.
What should you look for in an AMC in mutual funds?
As an investor, you must look at the following aspects before investing in mutual funds:
- Read the reviews: Check online reviews and talk to your peers or friends who are investing in the mutual fund to find out more about their experience.
- Compare AMCs: Compare between different AMCs and their performance in the long-term; i.e., in the last 5 to 10 years.
- Check the fund manager’s credentials:It is important to pick an AMC with a fund manager who understands your style of investment and is able to deliver desired returns as per your goals.
To sum it up
Before you invest your money, make sure to find out more about the AMC and the fund manager. This will ensure better security and peace of mind. If you want to compare different fund houses, you can browse online apps like moneyfy app and start invest in a lump sum or an SIP with a quick tap on your phone.
