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Mutual funds

Sarang Bhave (-) (115 Points)

12 November 2012

What is a Mutual Fund?

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4 Replies

premnath (Student Others) (42 Points)
Replied 12 November 2012

Mutual fund is a mechanism for pooling the resources by issuing units to the investors and investing funds in securities in accordance with objectives as disclosed in offer document.

Investments in securities are spread across a wide cross-section of industries and sectors and thus the risk is reduced. Diversification reduces the risk because all stocks may not move in the same direction in the same proportion at the same time. Mutual fund issues units to the investors in accordance with quantum of money invested by them. Investors of mutual funds are known as unitholders.

The profits or losses are shared by the investors in proportion to their investments. The mutual funds normally come out with a number of schemes with different investment objectives which are launched from time to time. A mutual fund is required to be registered with Securities and Exchange Board of India (SEBI) which regulates securities markets before it can collect funds from the public. Reliance Mutual Fund House is best available in private sector.

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Poonam (CS,Mcom CA FINAL) (512 Points)
Replied 12 November 2012

A mutual fund is a professionally managed Medium or vehicle that pools money from many investors and invests it in stocks, bonds, short-term money market instruments and other securities.Its fund operated by an investment company which raises money from shareholders and invests in a group of assets, in accordance with a stated set of objectives. mutual funds raise money by selling shares of the fund to the public, much like any other type of companycan sell stock in itself to the public. Mutual funds then take the money they receive from the sale of their shares (along with any money made from previous investments) and use it to purchase various investment vehicles, such as stocks, bonds and money market instruments. Inreturn for the money they give to the fund when purchasing shares, shareholders receive an equity position in the fund and, in effect, in each of its underlying securities. For most mutual funds, shareholders are free to sell their shares at any time, although the price of a share in a mutual fund will fluctuate daily, depending upon the performance of the securities held by the fund. Benefits of mutual funds include diversification and professional money management. Mutual funds offer choice, liquidity, and convenience, but charge fees and often require a minimum investment. A closed-end fund is often incorrectly referred to as a mutual fund, but is actually an investment trust. There are many types of mutual funds, including aggressive growth fund, asset allocation fund, balanced fund, blend fund, bond fund, capital appreciation fund, clone fund, closed fund, crossover fund, equity fund, fund of funds, global fund, growth fund, growth and income fund, hedge fund, income fund, index fund, international fund, money market fund, municipal bond fund, prime rate fund, regional fund, sector fund, specialty fund, stock fund, and tax-free bond fund.

How Mutual Fund Works

Kethki Narayan (Owner) (59 Points)
Replied 04 January 2013

A mutual fund is a financial instrument that collects money from several investors like you, and invests it in various investment plans like shares, bonds, etc. This fund is managed by experts.

NIshtha Sharma (Manager) (33 Points)
Replied 26 February 2019

A mutual fund is a pool of savings contributed by multiple investors. The common fund so created is invested in one or many asset classes like equity, debt, liquid assets etc. It is called a ‘mutual’ fund because all risks, rewards, gains or losses pertaining to, or arising from, the investments made out of this savings pool are shared by all investors in proportion to their contributions.

A mutual fund is, in essence, a Trust with a sponsor. They are registered with SEBI (Securities Exchange Board of India) who approves the Asset Management Company (AMC) managing the fund. The AMC is under the purview of the trustees who have to ensure the fund complies with regulation.