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What is a Mutual Fund – Educational Series on Mutual Funds

Mutual Funds –Things to Know to Get You Started

Any agent out there who is in the business of selling mutual funds often use industry related terms which are quite difficult to understand and comprehend. So, in order to make one’s life easy, here’s a special take on mutual funds, what it is and how an individual can benefit from the same and boost their investment and savings in equal measures.

Understanding mutual funds can be quite difficult for an individual if he or she is not well informed of the terms and what to do and how to go about it. No matter who you are, or what you do, if you have been planning for your daughter’s wedding or your child’s education, real estate, a mutual fund is seemingly a great option to make a worthy investment.

Mutual funds seem that one single arena in the financial world and in the world of investment as well where one gets to choose from a wide array of investment options like equity schemes. Money market schemes, hybrid schemes, ETF’s as well as fixed income schemes. Before we talk more on mutual funds rates and what are the best avenues to channel your money through investment, let’s understand what a mutual fund is and how it works and what are some good mutual funds to invest.


Important Facts To Know

Mutual funds are nothing but trusts that are professionally managed and works to pool savings from individuals who want to invest their money for extra profit from diversified options like stocks, debentures, bonds and other short-term money making instruments that are available in the market. Now, as such an investor who invests in a mutual fund have a commonly driven financial goal which gets their money invested in several different asset classes that meets the objectives of the deposits made. Mutual funds investments often call for a smaller sum of money which throws in a great chance for retail-based investors to control their money no matter how small or big their earning is.

Video Credit – DSP BlackRock Mutual Fund

Essentially looked upon as a pooled investment vehicle, mutual funds are actively managed and controlled by fund managers or they are tracked and monitored accordingly by a governing index. The fund as such are well diversified so as to limit the potential for any loss. Additionally, they also put up in front of you an active way how things get managed in a passive manner without you having to pay any high fees or a scenario that might require constant and undivided attention from investors in silos.

Mutual funds are also a great way to for any investor who is starting out for the very first time and lacks specific knowledge that is required to make the best returns flow out of their investments. Once you have your money in the mutual fund, the portfolio manager is responsible for rating mutual funds and any essential decisions that are made on your behalf.

Other Features

The next thing that one needs to know is how a mutual fund is being set up. A mutual is generally set up in the form of a basic trust that usually works with a sponsor, Asset Management Company and a host of several different trustees. The sponsor is the one who is bestowed with the task of primarily setting up the mutual fund. In India, every single Mutual Find business has to be registered with SEBI (Securities and Exchange Board of India).

It is the trustees of this mutual fund that is responsible for holding the property to the benefit of one and all unitholders.  An Asset Management Company that is approved by SEBI is usually in the charge of managing the funds by making appropriate investment across a wide range of securities. It is the trustees that are vested with the superintendence power dealing directly with an Asset Management Company. They are also responsible for the correct implementation of rules and regulations as laid down by SEBI.

Final words

Now, coming to the part where you shall get to know about the modus operandi of a mutual fund. A mutual fund generally collects money from a wide number of investors and moves on to invest the same in stocks and bonds.

These funding decisions are backed by professionals who have a thorough understanding of the market and they do their best in accomplishing superb growth by taking into consideration the strategic investment option. As such an investor receives several units of a mutual fund depending upon the amount of money that has been invested. Also, they are responsible for undertaking advisory service activity and sales and marketing part as well to promote the mutual fund.

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