With an investable surplus in hand these days, there are a lot of investment avenues available in the financial market for an investor. He can invest in Bonds, Bank Deposits and Corporate Debentures where the risk is low but returns are low as well. He may invest in Stock market where with high risk he also gets proportionally high returns. As per recent trends in the Stock Market, an average retail investor has always lost with periodic bearish trends. In order to maintain their investment portfolio, people began choosing managers with expertise in stock markets who would invest on their behalf. Even though we had several institutions who can provide wealth management. However, their service proved too costly for a small investor. In order to solve their problem, these investors have found a good shelter with the mutual funds for their investments.
CONCEPT OF MUTUAL FUND:
A mutual fund is a common pool of money collected from investors for the purpose of investing in securities such as bonds, stocks, money market instruments and other assets. The ownership of the fund belongs to all investors thus it is known as a joint or “mutual” fund. A single investor’s ownership of the fund is in the same proportion as the amount contributed by him or her to the total amount of the fund.
Mutual Funds are considered as trusts, which accept savings from different investors and invest their money in diversified financial instruments in order to reduce the risk and maximize their income. A Mutual Fund is a corporation in which the fund manager charges a small reasonable fee for professionally managing the funds provided by the investors.
The main objective sought to be achieved by Mutual Fund is to provide an opportunity for lower income groups to acquire financial assets without much difficulty. They cater mainly to the needs of the individual investor whose means are small and to manage investors portfolio in a manner that provides a regular income, safety, growth, liquidity and diversification opportunities.
“Mutual funds are collective savings and investment vehicles where savings of small (or sometimes big) investors are pooled together to invest for their mutual benefit and returns distributed proportionately”.
“A mutual fund is an investment that pools your money with the money of an unlimited number of other investors. In return, you and the other investors each own shares of the fund. The funds’ assets are invested according to an investment objective into the fund’s portfolio of investments. Aggressive growth funds seek long-term capital growth by investing primarily in stocks of fast-growing smaller companies or market segments. Aggressive growth funds are also called capital appreciation funds”.