Mutual funds are collection of money came from investors with an intention to invest into the industries having better prospectus. It is a pool of money invested in stocks, bonds, securities, infrastructure, telecommunication, energy, short-term money-market instruments and so on.
In eighties, process of economic liberalization brought dramatic changes in Indian industry, corporate sectors and the capital market. With this there was a demand for new financial services such as issue management, corporate counseling, capital restructuring and loan syndication. In eighties, UTI was holding the monopoly in mutual funds market but in nineties several public and private organizations took permission to setup mutual funds.
There are large number of investors who does not have enough time, knowledge, experience and ability to take financial risk to play a monetary game in stock exchange and earn income from the same. They do not have capability to manage their money. Mutual funds came into the market and penetrated so quickly to satisfy the investment need of these investors. Investors can seek a guidance of portfolio manager to minimize financial risk and ensuring safety and steady returns on investment. Portfolio managers are the professional fund managers who work on behalf of Asset management Company (AMC), guide you and manage your investments. AMC gives a management fees to these managers. Investors make money by earning dividends or on the investments and by selling securities that are appreciated in value.
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There are two types of mutual funds: Open-Ended and Close-Ended funds. Investors can buy or sell open-ended mutual funds at any time for the market price i.e. it does not have any locking period; they does not have a set of numbers of shares, they are always open to accept investment from investors. Normally, fund managers are the major players in open-ended mutual funds. Whereas Close-end mutual funds has a fixed number of shares and the value of shares fluctuates with the market. The investors can go for close-end mutual fund at the time of launching or buy from the current investors. Mutual fund is a piece of investment portfolio, investors’ gains and losses in share and expenses in amount of proportion of their investment.
