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An Asset Management Company (AMC) is a firm that invests the funds pooled from individual investors in securities with the objective of optimal return for investors in exchange for a fee. AMC maintains the diversity of portfolio by investing in both high-risk and low-risk securities such as stock, debt, real- estate, shares, bonds, pension funds, etc.
Factors such as industry risk, market risk, return risk, political risk are considered before selecting any security to meet the return on investment targets. For example, a debt fund invests in bonds and risk-free Government bonds to maintain the minimum risk. On the other side, an equity-oriented fund will invest in shares and stocks with high risk and high return.

What is an Asset Management Company?

Basically, when you invest with an AMC, you invest in a portfolio that AMC maintains for you. It is the responsibility of AMC to ensure an investor&rsquo;s financial objective is met.AMC ensures this by the following means:
1. Market Research and Analysis
To build a portfolio for an investor the asset manager needs to do a lot of research on the market trends, macro-economic and micro-economic factors, political aspects. On the basis of this research, the appropriate securities are selected which will outperform the return expectations of the investors.
2. Asset Allocation
On the basis of market research and investor's financial objective, the asset manager allocates the funds to different assets. For example, a debt-oriented would invest just 20% in equity-oriented funds to keep the risk levels low. However, an equity-oriented fund would invest more than 70% in equity and rest in debt. A balanced fund would end up with just 60% in equity and 40% in debt to balance out return and risk.
3. Creating a Portfolio
After research and analysis by analyst and decision of asset allocation are done, the asset manager on the basis of market findings creates a portfolio. Here the asset manager will take decisions like which security to sell, buy or hold for a period. The entire creation of portfolio is solely based on the market expertise of professionals, research and study and investment goals of the investor.
4. Review of Performance
Since the fund of an investor is at stake, the performance measurement of the portfolio becomes very important. At every point, the asset manager has to justify a buy, sell or hold securities to investors and trustees. Every asset manager generally provide regular updates investor regarding sales, repurchases, NAV, Return on risk, portfolio changes and factors which might affect their portfolio.

How are the funds managed by an AMC?

An AMC collects funds from different investors having different financial objectives. Now it invests such a large pool of funds in a very diversified portfolio and enjoys economies of scale, getting discounts on purchases. The return earned by the portfolio is then distributed among all the small retail investors.
Let us see how an Asset Management Company functions:
An AMC collects funds from different investors having different financial objectives. Now it invests such a large pool of funds in a very diversified portfolio and enjoys economies of scale, getting discounts on purchases. The return earned by the portfolio is then distributed among all the small retail investors.
The services provided by an AMC is charged either on a fixed basis or commission-based. Fixed Fee is nothing but a monthly or quarterly amount for maintaining the fund.
<h3>Points to consider before you choose an AMC:</h3>
Every AMC follows the investment objective of the schemes before investing and you must check on the track record and performance history of the investment schemes in the past during the ups and downs of the market.
It is very important to know your AMC well before you invest your hard-earned money.
While selecting a fund house ensure that the below parameters met.
a. The reputation of an AMC- Reputation is built by consistency in performance over a few years say 5 years or 10 years. The investor must go through the performance through annual reports of schemes and AMC, reviews prevalent in the market and compliance report to SEBI, AMFI, and RBI.
b. Fund Manager's credibility- AMC work in parallel to its fund manager. The performance of the fund manager is now the performance of AMC then. Hence, an investor must look for past performance of the fund manager w.r.t managing the assets and funds.
c .Price and Value- Before selecting any fund, an investor must consider looking at the price of the fund and the value creation and return that the fund offer.
d .Fees and commission- Few AMCs charges a fixed fee for their services while others charge a commission on the return earned on the fund. A fixed is considered over commission because an investor will always know the outflow amount beforehand.
<h3>Bodies Governing AMC's Operations</h3>
AMC performs under the supervision of the board of trustees. All the Asset Management Companies are governed by SEBI and AMFI.
Securities and Exchange Board of India (SEBI) is the Indian Capital Market Regulator which governs and controls every AMC in India.
The Association of Mutual Funds in India (AMFI) is a statutory body formed by mutual fund companies. AMFI was formed with the vision of a transparent and ethic driven financial industry. Every AMC must comply with the regulations led by AMFI.
Banks being sponsors are governed by RBI as well along with SEBI and AMFI.
Lastly, all the regulatory bodies SEBI, AMFI, and RBI are governed by RBI.
<h3>Guidelines laid by SEBI, AMFI, and RBI for an AMC</h3>
Some of the mandatory practices and guidelines laid down by SEBI, AMFI, and RBI for a mutual fund company to follow:
a. The Chairman of an AMC cannot hold the position of Trustee of any mutual fund.
b. Key personnel of every AMC should not have indulged or convicted for any fraudulent or offensive acts.
c. AMC should not act as a Trustee of a mutual fund.
d. The net worth of an AMC must be not less than Rs. 10 crores.
e. Before making an investment in any of its schemes the company must disclose its intention to invest in the offer documents.
f. A quarterly report on activities and compliance of regulations must be submitted to the trustees.
<h3>Reliability of AMC compared to Banks</h3>
We often have the notion that mutual fund companies are not as reliable as Banks and the schemes offered by AMC is not as secure as a Fixed Deposit Interest. The fact is every mutual fund company or AMC is governed by RBI and Ministry of Finance just like any Bank. Hence, it is safe to invest with a mutual fund company or AMC.
An AMC is appointed by the sponsor and trustee to manage the pool of funds. AMC acts under the supervision of trustees who are governed by SEBI and AMFI. This ensures transparency, accountability, and objectivity. Hence one must go ahead and invest to optimize their wealth and save their taxes.

How do Asset Management Company functions?

Fund Categories

Risk

Duration

Different categories of mutual funds have varying risk levels that may range from very high, high, moderately high, moderate, and moderately low to low. As the name suggests, moderate risk funds expose investors&rsquo; capital to only average levels of risk. The best moderate risk funds invest in varied securities to maintain reasonable market risks against inflation-adjusted returns.

Best Moderate Risk Mutual Funds

The salient features of the best moderate risk funds are discussed below -&nbsp;
Types: These funds mainly refer to MIP funds, hybrid funds, dynamic bond funds, short-duration funds, and arbitrage funds.
Asset allocation: In dynamic bond funds, assets are allocated to long-term and short-term bonds based on the interest rate levels. On the other hand, dynamic asset allocation mutual funds park money in fixed income investments and stocks. Asset allocation is often changed based on prevailing market momentum.&nbsp;
Risk-reward ratio: Moderate risk <a href="https://groww.in/mutual-funds/" target="_blank" rel="noopener">mutual funds</a> invest in equity and debt instruments. This offers investors steady risk-adjusted returns. Alternatively, in case the funds generate negative returns, the resulting losses will be moderate to low.&nbsp;

Features of Moderate Risk Mutual Fund

Investors must note that short duration and dynamic bond mutual funds are treated as debt funds and taxed accordingly. However, dynamic asset allocation mutual funds are given the same treatment as equity funds if the fund&rsquo;s equity assets are at least 65% on a median basis. Note that when the fund&rsquo;s equity assets are less than 65%, it is given a similar treatment as debt funds and taxed accordingly.&nbsp;
Long-term Capital Gains Tax: Capital gains on short-duration funds and dynamic bond fund held for more than 3 years are subject to long-term capital gains tax at the rate of 20% with indexation. Conversely, proceeds on a fund with a higher concentration of equity instruments will attract 10% LTCG if held for more than 1 year. Note that LTCG on equity-based funds is exempt from tax up to Rs.1 lakh.&nbsp;
Short-term Capital Gains Tax: Capital gains on dynamic bond funds and short duration funds held for less than three 3 years attracts short-term capital tax as per the investor&rsquo;s tax slab. On the other hand, gains on equity-oriented schemes held for less than a year fetch a 15% tax irrespective of the amount.&nbsp;
TDS: Fund managers are mandated to deduct a 10% <a href="https://groww.in/p/tax/tds/" target="_blank" rel="noopener">TDS </a>on the dividend pay-outs exceeding Rs.5000.&nbsp;

Taxability

Investors who plan to generate substantial returns without being exposed to intense risks often park their money into the best moderate risk mutual funds. These schemes are considered suitable for investors whose primary objective is to generate stable returns and diversify their investment portfolio.&nbsp;
Risk-conscious investors must note that these funds involve some risks premised on their asset allocation. For instance, an equity-based fund is more vulnerable to market volatility. Conversely, a debt-oriented scheme can be susceptible to moderate levels of credit, inflation, and interest risks.&nbsp;
It must be noted that these funds provide adequate returns over a medium to long-term time horizon.&nbsp;&nbsp;
Nonetheless, investors must consider these few things before parking money in any top moderate risk mutual funds &ndash;
Investment goal: Investors may find it more convenient to identify their investment objective before buying units of a scheme. Typically, moderate risk mutual funds are considered more suited for mid-term financial goals.&nbsp;
Risk profile: Recognising personal risk-taking capability makes the process of investing simpler in more than occasion. Measuring their risk-bearing capacity is essentially estimating the level of loss they can digest on their investments. In most cases, moderate risk mutual funds expose investors to credit and interest risks.
Past performance record: A fund&rsquo;s performance record is a crucial point of research. Seasoned investors make it a point to find out things like <a href="https://groww.in/mutual-funds/amc" target="_blank" rel="noopener">AMC </a>track record, investment style of the fund manager, and performance when compared to a benchmark to determine suitability.
Expense ratio: Generally, the expense ratio varies from one fund scheme to another. Essentially, it is the annual maintenance charge levied by an AMC.&nbsp;
Time horizon: Best moderate risk mutual fund is considered suitable for a medium investment horizon of 3 - 5 years.&nbsp;
Fact sheet: Investors often prefer checking credit ratings and the duration of underlying bonds in their choice of fund to make an informed decision. &nbsp;
Direct and regular plan: Investors can invest in a moderate risk fund via a direct plan or a regular plan. In the case of the former, there are no intermediaries, and the fund houses offer the fund. Conversely, in the case of regular plans, investors can park money into the best moderate risk funds via a third-party agent, i.e., a broker or a distributor. A direct plan attracts a lower expense ratio when compared to a regular plan.

Who Are These Funds Suited For?

These are some of the major benefits of the best moderate risk funds 2025&nbsp;&ndash;
Returns: These funds primarily invest in moderate risk instruments that generate stable returns. Since the portfolio comprises a mix of debt and equity instruments, investors can generate sustainable risk-adjusted earnings over a long time.&nbsp;
Tax-efficient returns: When compared to fixed deposits, moderate risks funds are considered more tax-efficient.&nbsp;
Financial goals: These funds come are mostly suited for an investment horizon of 3-5 years. Accordingly, investors with mid-term financial goals like saving up for a down payment, paying off unsecured debt, etc., invest in moderate-risk funds to achieve such goals.&nbsp;
Safety quotient: The best moderate risk funds are considered safer than high-risk investments. The scope of diversification allows cushioning the impact of losses, thereby exposing investors to moderate losses.&nbsp;
Investment mode: Investors have the flexibility to invest in moderate-risk funds via <a href="https://groww.in/p/sip-systematic-investment-plan/" target="_blank" rel="noopener">SIP </a>or a lump sum as per their requirements and financial standing. Note the minimum investment amount depends on the fund scheme.&nbsp;

Major Advantages