WHAT IS MUTUAL FUND?
Mutual fund refer to investment that is made by a group of investor and managed by an investment manager to make the investment on their behalf in various securities and bonds, and the benefit or profit is divided proportionately among the investor in respect of the money invested by each of them.
WORKING OF MUTUAL FUNDS
Many of us are aware of mutual fund but hardly anyone of us are aware about its working,how these mutual fund companies actually generate revenue, and what are there the main sources of incomes?
The main source of income for these financial intermediaries are the fees that they charged the investor on their investment, the fees are decided on the basis of the types and size of funds
Sales commission charged on the purchase and redemption of funds generate the highest percentage of revenue.
The range may vary from 1% to 8% depending upon the characteristics or lifestyle of the funds.
Now lets see from investor point of view how do they make money from investing in mutual funds.
Investor can make money in 2 ways that is by the way of dividends and capital gains. The investment manager invests in stock and various other securities that give return in the form of dividends on market earning.
The other way is capital gain if they sell the stock at prices higher than that at which they were initially purchased.
Mutual fund are a perfect solution for those who want to own stock without doing any research but that doesn't mean that they are risk-free, there is always an element of risk. The investor should never underestimate the risk, mutual fund never give assurance of the return.
FUTURE OF MUTUAL FUNDS
The mutual fund has been highly growing in india and is expected to double in the next 5 years. Mutual funds in India has the scope of penetrating into the rural and semi-urban areas.
The mutual fund has been highly growing in india and is expected to double in the next 5 years. Mutual funds in India has the scope of penetrating into rural and semi-urban areas. Financial planners are introduced into the market, which would provide people with better financial planning.
FACTORS THAT ARE IMPACTING MUTUAL
Economic growth, rise in the middle-income population and the growing habit of saving among people will give a boost to the mutual fund industry. Nowadays even government are taking intiative for raising financial awareness among the masses which will lead to higher penetration of mutual funds. Mutual funds may have a lot of growth drivers but they face equal number of challenges that range from taxation to competition from other financial products.
Mutual funds may have a lot of growth drivers but they face equal number of challenges that range from taxation to competition from other financial products.
Stamp duty value is charged at 0.005% on all mutual fund purchase is a roadblock in the growth of mutual funds as this make the transaction expensive, even ULIP stood as a strong competition to these funds as it provide dual benefit of protection and long term savings.
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