Mutual Funds in India started in the year 1963 with the collaboration of United Trust of India to solve the problems of the Government of India and the Reserve Bank of India. A Mutual Fund is a type of financial cycle made up of a pool of money collected from various investors to invest in securities like stocks, bonds, money market instruments and other assets. Mutual Funds are operated by professional money managers who give the fund assets and try to produce capital gain or income for the fund investors. A Mutual Funds portfolio is structured and maintained to match the investments objectives stated in its prospectus. Mutual Funds give small or individual investors access to professionally managed portfolios of equities, bonds and other securities and performance is usually tracked as the change in the total market cap of the fund.
Must read – Type of Mutual Fund?
HOW MUTUAL FUNDS WORKS
A Mutual Fund is both an investment and a real company. This work in dual nature may seem strange, but it is not different from how a share of AAPL is a representation of Apple Inc. When an investor is buying partial ownership of the mutual fund company and its assets. The difference is that Apple is in the business of making innovative devices and tablets, while a mutual fund company is in the business of making an investment.
WHAT ARE THE BENEFITS OF INVESTING IN MUTUAL FUND?
One of the advantages of investing in a mutual fund is that each investor (even with a small investment ) gets access to professional money management and expertise. Also, it would be very difficult for an investor to create a diversified portfolio of investment on his own with a small amount of money. With mutual funds, each investor participates proportionally in the return of the scheme generated. Each unit gets a proportional share of gain ( or bear loss ) from the fund. There is a portfolio report generated for each investor, which tracks all investments and the return generated by the mutual funds.
