basic of mutual funds
TRANSCRIPT
Submitted by-Pritam SutradharSubmitted to- Prof. Mamoni Kolita
Enroll. No. 14ATUA011
ICFAI University, Tripura
Mutual Funds A mutual fund is a common pool of money into which investors place their contributions that are to be invested in different types of securities in accordance with the stated objective. An equity fund would buy equity assets – ordinary shares, preference shares, etc. A bond fund would buy debt instruments such as debenture bonds, or government securities/money market securities. A balanced fund will have a mix of equity assets and debt instruments. Mutual Fund shareholder or a unit holder is a part owner of the fund’s asset.
Myths about Mutual Funds
1. Mutual Funds invest only in shares.2. Mutual Funds are prone to very high risks/actively traded.3. Mutual Funds are very new in the financial market. 4. Mutual Funds are not reliable and people rarely invest in them.5. The good thing about Mutual Funds is that you don’t have to pay attention to them.
Mutual FundsA Cyclic Process
History of Mutual FundsPhase I – 1964 – 87: In 1963, UTI was set up by Parliament under UTI act and given a monopoly. The first equity fund was launched in 1986. Phase II – 1987 – 93: Non-UTI, Public Sector mutual funds. Like- SBI Mutual Fund, Canbank Mutual Fund, LIC Mutual Fund, Indian Bank Mutual Fund, GIC Mutual Fund and PNB Mutual Fund.
History of Mutual Funds
Phase III – 1993 – 96: Introducing private sector funds. As well as open-end funds.
TYPES OF MUTUAL FUNDS
By Structure:
1. Open-ended Funds
2. Closed-ended Funds
Advantages of Mutual Funds• Professional management
• Reduction of transaction costs
• Wide Choice to suit risk-return profile
•Liquidity
•Convenience and Flexibility
•Tax Savings
Disadvantages of Mutual Funds• No control over costs
• High Risk
•Short terms objective
Mutual Funds Prove Best!
While instruments like shares give high returns at the cost of high risk, instruments like NSC and bank deposits give lower returns and higher safety to the investor.
Mutual Funds aim to strike a balance between risk and return and give the best of both to the investor.