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Mutual Fund is an Instrument of Investing Money

Mutual Fund is an Instrument of Investing Money

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Published by Sagar Zajam

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Published by: Sagar Zajam on Oct 13, 2011
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Mutual Fund is an instrument of investing money.

Nowadays, bank rates have fallen down and are generally below the inflation rate. Therefore, keeping large amounts of money in bank is not a wise option, as in real terms the value of money decreases over a period of time. One of the options is to invest the money in stock market. But a common investor is not informed and competent enough to understand the intricacies of stock market. This is where mutual funds come to the rescue. A mutual fund is a group of investors operating through a fund manager to purchase a diverse portfolio of stocks or bonds. Mutual funds are highly cost efficient and very easy to invest in. By pooling money together in a mutual fund, investors can purchase stocks or bonds with much lower trading costs than if they tried to do it on their own. Also, one doesn't have to figure out which stocks or bonds to buy. But the biggest advantage of mutual funds is diversification. Diversification means spreading out money across many different types of investments. When one investment is down another might be up. Diversification of investment holdings reduces the risk tremendously. On the basis of their structure and objective, mutual funds can be classified into following major types: Closed-end funds A closed-end mutual fund has a set number of shares issued to the public through an initial public offering. Open-end funds Open end funds are operated by a mutual fund house which raises money from shareholders and invests in a group of assets Large cap funds Large cap funds are those mutual funds, which seek capital appreciation by investing primarily in stocks of large blue chip companies Mid-cap funds Mid cap funds are those mutual funds, which invest in small / medium sized companies. As there is no standard definition classifying companies Equity funds Equity mutual funds are also known as stock mutual funds. Equity mutual funds invest pooled amounts of money in the stocks of public companies. Balanced funds Balanced fund is also known as hybrid fund. It is a type of mutual fund that buys a combination of

Hence. the fund's local region.common stock. . bonds or other securities.Load mutual funds and No-Load mutual funds. Index funds An index fund is a a mutual fund or exchange-traded fund) that aims to replicate the movements of an index of a specific financial market. International mutual funds International mutual funds are those funds that invest in non-domestic securities markets throughout the world. unlike conventional mutual funds Value funds Value funds are those mutual funds that tend to focus on safety rather than growth. Exchange traded funds Exchange Traded Funds (ETFs) represent a basket of securities that is traded on an exchange. Fund of funds A fund of funds (FoF) is an investment fund that holds a portfolio of other investment funds rather than investing directly in shares. usually. and often choose investments providing dividends as well as capital appreciation. Regional mutual funds Regional mutual fund is a mutual fund that confines itself to investments in securities from a specified geographical area. No load funds Mutual funds can be classified into two types . and short-term bonds Growth funds Growth funds are those mutual funds that aim to achieve capital appreciation by investing in growth stocks. Sector funds Sector mutual funds are those mutual funds that restrict their investments to a particular segment or sector of the economy. Money market funds A money market fund is a mutual fund that invests solely in money market instruments. Money market instruments are forms of debt that mature in less than one year and are very liquid. bonds. similar to a stock. preferred stock.

that have numerous daily banking transactions. Both the banks are now defunct. which have been included in the Second Schedule of Reserve Bank of India (RBI) Act. 14 largest commercial banks were nationalized followed by six next largest in 1980. The origin of banking in India can be traced back to the last decades of the 18th century. Most of the banks in India were founded by Indian entrepreneurs and visionaries in the pre-independence era to provide financial assistance to traders. There is great flexibility in maturity period and it ranges from 15days to 5 years. Bank Fixed Deposits Bank Fixed Deposits are also known as Term Deposits.India has a well developed banking system. The deposit has a fixed tenure. Demat account is just like a bank account where actual money is replaced by shares. Reserve Bank was nationalized in 1947 and was given broader powers. a specific amount is invested in bank on monthly basis for a fixed rate of return. Just as a bank account is required if we want to save money or make cheque payments. The oldest bank in existence in India at the moment is the State Bank of India. At that time it was known as the Bank of Calcutta. at the end of which the . The commercial banking structure in India consists of: Scheduled Commercial Banks and Unscheduled Banks. RBI includes only those banks in this schedule. which in 1935 formally took over these responsibilities from the then Imperial Bank of India. In a Fixed Deposit Account. Current Account Current Account is primarily meant for businessmen. Recurring Bank Deposits Under a Recurring Deposit account (RD account). The State Bank of India came into existence in 1806. private banking was again allowed. It is higher in case of longer maturity period. The role of central banking in India is looked by the Reserve Bank of India. But with adoption of economic liberalization in 1991. a certain sum of money is deposited in the bank for a specified time period with a fixed rate of interest. SBI is presently the largest commercial bank in the country. agriculturists and budding Indian industrialists. companies. firms. Current Accounts are cheque operated accounts meant neither for the purpose of earning interest nor for the purpose of savings but only for convenience of business hence they are non-interest bearing accounts Demat Account Demat refers to a dematerialised account. The General Bank of India and the Bank of Hindustan. Indian banks can be broadly classified into public sector banks (those banks in which the Government of India holds a stake). we need to open a demat account in order to buy or sell shares. they may be publicly listed and traded on stock exchanges) and foreign banks. which satisfy the criteria laid down vide section 42 (6) (a) of the Act. private banks (government doe not have a stake in these banks. The rate of interest for Bank Fixed Deposits depends on the maturity period. Scheduled commercial Banks constitute those banks. In 1969. which started in 1786 were the first banks in India. 1934. public enterprises etc.

Foreign Banks in India Foreign banks have brought latest technology and latest banking practices in India. under some circumstances the people above 55 years of age are also eligible to enjoy the benefits of this scheme. Nationalised Banks Nationalised banks dominate the banking system in India. In 1921. 1935 in accordance with the provisions of the Reserve Bank of India Act. which were founded in the pre-independence era to cater to the banking needs of the people. it was nationalized in 1949. three major banks i. when Imperial Bank of India was nationalised (under the SBI Act of 1955) and re-christened as State Bank of India (SBI) in July 1955. Senior Citizen Saving Scheme 2004 The Senior Citizen Saving Scheme 2004 had been introduced by the Government of India for the benefit of senior citizens who have crossed the age of 60 years. merged to form Imperial Bank of India. Savings Bank Account Savings Bank Accounts are meant to promote the habit of saving among the citizens while allowing them to use their funds when required. 1934. However. Government has come up with a road map for expansion of foreign banks in India. Bank of Bombay. The history of nationalised banks in India dates back to mid-20th century. and Bank of Madras. Its central office is in Mumbai where the Governor of RBI sits. They have helped made Indian Banking system more competitive and efficient. Reserve Bank of India The Reserve Bank of India was established on April 1. Private Banks in India Initially all the banks in India were private banks. The main advantage of Savings Bank Account is its high liquidity and safety.e. Though initially RBI was privately owned.principal sum as well as the interest earned during that period is returned to the investor. Banks of Bengal. .   $.78 40.95074/8709:730/94903.4:398 986:/9.47/.384103.8 2070/9414722507..74.420:5 9.90380 .383 3/.14790 -030194180347.083:2-.9089-.789030/.3.0.3413/.9079490-.857..908-... .9090-. %08947413.573.020   4703. %0.9  %4:39.-80/4357 3..941 .0./-0033974/:.514705.80/ :3/0790 $.3.07057.0.0833/.38 .425099.0-74:9..089050450.3.843841 90#0807.0.344.0732039.4390294:809071:3/803706:70/ %02.943.94.3413/..3413/...411.33889022470.0 050/ $ 3:   !7.3833/.24390.942/  9..3$.-4.341...3/.070904.38.041$.08947   #0807.3$.70..38/423.0 07.840-09403490-0301984198 8.943.039:7 032507.3/011./2.8.730//:739.7.  .943.3833/.80.80/-.4:39 $.4:398..   .0397.90-.0990574. 39.3/8./.8 3.3..109   $0347903$.020  %0$0347903$. %0#0807.3.3/.38434114703-.#.0/3 98..   ./. 4703-...47-.3413/.90.00.041 0.80/-..: .0/-904.07014:3/0/390570 3/0503/03...80/.74880/90.0.38 ..9.39.8$9.908990.5.3833/.3833/.38 0 .33300/8419050450 3 97002.34142-./03/./7..89039070890..3413/.8089.020 .3357.338890233/.07 :3/078420 .7841..-9418.943.039 4.8:2..0732039413/.90-.0.90384.90430/ 9.

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