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Meaning Of Mutual Funds

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Title: Meaning Of Mutual Funds


1
Mutual Funds - MyMoneyStore
  • Meaning of Mutual Fund
  • History of Mutual Fund
  • Flow chart of Mutual Fund
  • Types of Mutual Funds
  • Advantages of Mutual Fund

2
Meaning Of Mutual Funds
  • A mutual fund can be defined as a pool that
    brings together investments from different to
    channelize towards one financial objective. The
    money gathered can be put into several capital
    market instruments like shares, debentures,
    hybrid stocks etc.

3
  • The mutual fund domain started in the 1963 along
    with the creation of the Unit Trust of India, at
    the directive of the Government of India and RBI.
    The history of mutual funds can be distributed
    into 4 different stages

History Of Indian Mutual Funds
4
Stages of Mutual Funds
  • First Stage (1964-87)
  • The Unit Trust of India (UTI) was established on
    1963 by an Act of Parliament. It was set up by
    RBI and regulated by the Regulatory and
    administrative control of RBI. This was
    introduced by UTI in the year 1964. Towards the
    end of 1988, UTI had assets worth 6,700 crores
    under its management.
  • Second Stage (1987-1993)
  • This is the stage where public sectors funds were
    introduced. Marked by the entry of Public Sector
    Funds, these non- UTI funds were launched in
    collaboration with LIC and General Insurance
    Corporation of India (GIC). SBI came out with
    its very first non UTI mutual fund in June 1987.

5
Stages of Mutual Funds
  • Third Stage (1993-2003)
  • During this phase, many private sector mutual
    funds entered the market in the year 1993. This
    stage has been counted quite significant with its
    wide spectrum of fund families. The first Mutual
    Fund Regulations came into existence under which
    all mutual fund schemes were registered and
    regulated, excluding UTI.
  • Fourth Stage (Since Feb 2003)
  • After the repeal of UTI Act 1963, UTI funds were
    segregated into 2 categories. One is the
    Specified Undertaking of UTI with assets worth
    29,835 crores under its management towards end of
    January 2003. The second is the UTI Mutual Fund
    Ltd, launched by SBI, PNB, BOB and LIC. It is
    directly governed by the Mutual Fund Regulations
    and registered under SEBI.

6
GROWTH IN ASSETS UNDER MANAGEMENT The flow
chart briefly describes the working of a mutual
fund
7
Types of Mutual Funds
8
Mutual Funds - MyMoneyStore
  • A mutual fund can be broadly termed as open-ended
    or close-ended, depending on the maturity period.
    Schemes can be divided basis the maturity period
    as listed below
  • Open-ended Fund An open-ended mutual fund
    scheme can be subscribed and reinvested on an
    uninterrupted basis. They do not have any defined
    maturity period.
  • Close-ended Fund A close-ended mutual fund
    scheme has a fixed maturity period between 5-7
    years. The funds are available only during a
    specific time period at the time of introduction.
  • Fund aimed at Investment Objective this is a
    mutual fund scheme which focuses on growth,
    income and balanced fund focusing on the
    investment objective.
  • Equity Oriented Scheme The purpose of equity
    oriented scheme is to grow capital appreciation
    during the medium and long term. These mutual
    funds have high risks and equally high rewards.
    They provide perks like dividends, capital
    appreciation, etc.

9
Mutual Funds - MyMoneyStore
  • Debt Oriented Scheme The purpose of debt
    oriented scheme is to provide regular income at
    specified periods. These investments are mostly
    focused on bonds, debentures, securities and
    money market securities. These are slightly less
    risky.
  • Hybrid Fund Hybrid funds are a right mix of
    equity and debt funds for a balanced approach in
    investments. A proportionate amount is invested
    into both high risk and low risk securities. This
    is apt for moderate growth in the market.
  • Money Market Money market investments are mostly
    income funds. They aim to provide quick
    liquidity, capital appreciation and steady
    income. These schemes basically invest into a
    pool of short term securities like treasury
    bills, commercial papers, government securities,
    etc. Corporates and giant companies find these
    investments appropriate over durations. Its a
    good way to allocate idle funds into appropriate
    channels over short spans.
  • Gilt Funds Gilt funds are pooled purely into
    government securities, without a default risk.
  • Index Funds This scheme puts money into equal
    weightage consisting of an index. This completely
    depends on the fall and rise of the index.

10
Advantages of Mutual Funds
  • Systematic Management
  • Risk Minimization
  • Earning Potential
  • Easy Liquidity
  • Wide range of Schemes
  • Tax advantages

11
Various Mutual Funds In India
  • State Bank of India mutual fund
  • ICICI prudential mutual fund
  • TATA mutual fund
  • HDFC mutual fund
  • Birla sun life mutual fund
  • Reliance mutual fund
  • Kotak Mahindra mutual fund etc.
  • The Mutual Fund Industry is growing tremendously.
    Mutual Fund schemes include an extensive range
    of Investment Options. Therefore, invest today!

12
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