2. 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.
3. 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.
5. History of Mutual Funds
Phase 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.
6. History of Mutual Funds
Phase III – 1993 – 96: Introducing private sector funds.
As well as open-end funds.
11. 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.