What are Mutual Funds?
Mutual funds is an investment vehicle that is made by pooling
funds from investment in securities such as stocks, bonds, money market
instruments and other similar assets. Mutual funds are operated by fund
managers, who invest the fund's capital in attempt to produce capital gains.
As the investment is made across a wide industries and sectors, the
associated risk is reduced to minimum. Mutual fund is issued to an
individual based on the capital invested. Investors of mutual funds are
referred as unitholders.
The profit or loss in the investment is equally shared by all the investors
according to proportion of investment made. Mutual funds are launched in
form of schemes with different investment objectives from time to time. A
mutual fund scheme should be registered with Securities and Exchange Board
of India (SEBI).
Mutual Funds in India - History
The concept of Mutual Funds in India emerged as success as early as 1990s,
when Government allowed public sector banks and institutions to launch
mutual funds schemes. Unit Trust of India was the first Mutual Fund in India
set-up in the year 1963.
Securities and exchange Board of India (SEBI) act was passed in the year
1992. The objective of SEBI are - to regulate security market and protect
the interests of investor community. It is regulatory institutions which is
responsible for formulating policies and guidelines for operation of mutual
funds in India.