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MUTUAL FUND

By- Rang Narayan

A

Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal.
funds first became popular in the United States in the 1920s. The first funds were of the closed-end type with shares that trade on an exchange.

 Mutual

Why mutual funds were sold publically?
 After the stock market crash of 1929, Congress

passed a series of acts regulating the securities markets in general and mutual funds in particular. The Securities Act of 1933 requires that all investments sold to the public, including mutual funds, be registered with the Securities and Exchange Commission (SEC) and that they provide prospective investors with a prospectus that discloses essential facts about the investment.

ADVANTAGES OF M.F.

Mutual funds are ‘open-ended’ investment funds, i.e new investors can contribute money to the fund at any time, and existing investors can return their units or shares to the fund for redemption at any time. Diversification: Investing in a number of different securities helps reduce the risk of investing. Affordability: With many mutual funds, you can begin buying units with a relatively small amount of money (e.g., $500 for the initial purchase).

OTHER ADVANTAGES:
 Liquidity
 Flexibility  Performance Monitoring

DISADVANTAGES:
 Fees
 Less control over timing of recognition of gains  Less predictable income  No opportunity to customize

Type of Mutual Fund Schemes Investment Objective Special Schemes

Structure Open Ended Funds

Growth Funds Income Funds

Industry Specific Schemes

Close Ended Funds Interval Funds

Index Schemes
Sectoral Schemes

Balanced Funds
Money Market Funds

TYPES OF M.F.
Money Market Funds(open ended fund): Invest in short-term (less than one year to maturity) corporate and government debt securities such as treasury bills, bankers acceptances and corporate notes.  Fixed Income Funds(close ended): Invest in debt securities like bonds, debentures and mortgages that pay regular interest, or in corporate preferred shares that pay regular dividends.

• Growth or Equity Funds: Invest primarily in common shares (equities) of Canadian or foreign companies, but may hold other assets as well. • Balanced Funds: Invest in a ‘balanced’ portfolio of equities, debt securities and money market instruments with the objective of providing reasonable returns with low to moderate risk.

Global and Foreign Funds: These funds can offer investors international diversification and exposure to foreign companies, but are subject to risks associated with investing in foreign countries and foreign currencies. Specialty Funds: May invest primarily in a specific geographical area (e.g., Asia) or a specific industry (e.g., high technology companies).

WHY INVEST IN MUTUAL FUNDS?
SAVE

THROUGH MUTUAL FUNDS

INVEST THROUGH MUTUAL FUNDS

Have a

long term objective

Park surpluses
Profile your risk

Short term

investment

Select appropriate

Easy liquidity Tax benefits

MF scheme, based on risk return requirement
Mix of

equity and debt

Invest regularly/with

flexibility