Mutual and other Funds

  • 6.'' Indian Mutual Funds are attracting every investor's attention .'' Explain the key characteristics of a Mutual Fund in this regard.

    Indian Mutual Funds are attracting every investor's attention . The number of retail investors investing in the Mutual Fund market has risen considerably;earlier , institutional investors predominantly invested in the MF market. Although  Mutual Fund investing is  a blooming concept in an economy like India, the economic , social, and environmental factors had an impeding effects on the growth of the Mutual Funds in a short span of time. The main factors attributed to the Mutual Fund growth is that  many fund houses introduced various schemes , in particular the banks . In today's environment , banks are the main participatory resource  for Mutual Fund schemes. According to market sources , 70% of the Mutual Funds products are through banks . Another reason is the marketing strategy that many fund houses adopt in order to attract customers . Such marketing strategies  have been in the form of aggressive campaingning . In addition to these factors , another factor, which helped in the growth of these Mutual Funds , has been the creation of tailored schemes to suit retail investors' requirement .Retail investors are those who are ''relishing the small share of a big pizza,'' as they invest their hard -earned money in the Mutual Funds.

    Ans: The key characteristics of a Mutual Fund are as follows:

    • Investors , who have pooled their Funds, are actually the owners of the Mutual Funds units; that is, they have ownership in their hands.
    • Usually , investment professional and other service provider manage Mutual Funds for which they earn a fee from the Fund.
    • The Fund that are collected from investors are in turn invested in a portfolio of marketable securities and the value of the portfolio is updated everyday.
    • The investors' share is denominated in units . The value of the units changes everyday with the change in the portfolio's value. The value of one unit of an investment is called Net Asset Value of NAV per unit.
    • Investment portfolio of a Mutual Fund is created according to the stated investment objective of the Fund.