A mutual fund is an investment fund which is professionally managed that collectively money from many investors to purchase the securities there is no particular definition of the term mutual fund.
Generally mutual funds are applicable to open end investment organizations only a few mutual funds have their own shares and these are termed as equity funds but some other funds has their own bonds and they are officially called as bond funds or it is often known as fixed income funds.
However mutual funds is the combination of both shares and bonds investor invests in variable returns however it is risky affair in share market and also in mutual funds however there are some mutual funds available in markets which are available in market are having less risk factor.
Hedge funds are not mutual funds because hedge funds cannot be sold to the general public generally mutual funds are registered with the securities and exchange commission and over checked by board of directors or the board of trustees and managed by the investment advisor.
Mutual funds was first introduced in India in 1963 Indian government launched unit trust India(UTI) until 1987 it enjoyed the monopoly in the Indian mutual fund.
when the Indian government started controlling the Indian financial companies by establishing their own funds Indian financial companies include,
State bank of India , canara bank, Punjab national bank but in the year 1993 mutual funds was opened to all the private individuals because of the constitutional amendments which was put forward by UPA government under the existence of principles like liberty, globalization, privatization in India.
The first and foremost private fund established was Kothari pioneer and later It merged with Franklin Templeton according to the report in 1996 by SEBI the mutual fund regulation which is a comprehensive regulatory frame work
Indian mutual fund industry had benefited largely from the outside activity of servicing the investors of two of the leading register and transfer agents in India they are CAMS and karvy.
In India more than 65% of the assets servicing is done by CAMS while the rest of the assets servicing is done karvy own in house RTA set up services is done to its investors by Franklin Templeton mutual fund CAMS and karvy both the RTA have a large group of network to their local offices.
which enables the investor individuals to transact locally due to implementation of these customer service centre’s it provides a wide range of servicing including acceptance and processing of financial transaction it provides of units apart from providing statements of accounts to nomination registration
Generally funds are classified based on the principal investments there are mainly four types of funds money market funds fixed income funds share or equity funds and hybrid funds may also be categorized as active and passive managed
In India the Association of Mutual funds in India (AMFI) is an standard organization in the mutual fund sector many of the mutual fund organizations firms as its members I was first started in 1995 this association is established to develop the mutual funds.
In India this was introduced by improving the professional and ethical standards according to the report in 2015 there were 44 firms as its members investors have to pay all the fund expensenses which may result in reduction of fund returns and the performance some issues are going on the level of expanses
The fund investments is traded by the sponsor or fund manager he must be a registered investment advisor funds that come under the same company or same family or same organization is known as fund complex or fund family
In many kinds of securities we invest mutual funds the type of securities that individual fund may invest are set in forward in the fund’s prospectus and a legal document which describes the objective and the type of income that fund seeks the mutual fund investment rules and regulations and performance of the fund is continually monitored by fund’s portfolio manager.
For example generally a capital appreciation fund looks to earn most of its fund returns from increasing prices in the securities it holds the income from the dividends the fund manager describes all the investment approach and uses to select investments for the fund.
Hedge funds are not the same kind of mutual funds hedge account is governed by the investment company in hedge funds we don’t need to register with the SEC
As we invest directly into individual securities it has advantages and disadvantages
- Increased diversification as we know one fund holds many securities this leads to deduction of diversification
- Due to the daily liquidity the share holders of open end funds and unit investment trusts at every trading day they may sell their holdings back the fund at a price equal to the closing net asset value of the fund’s holdings.
- Open and close end funds may hire the managers or portfolio managers to supervise the fund’s investments i.e. professional investment management.
- For only larger investors we have ability to participate the investments for example one investor individual may find difficult to participate in the foreign markets.
- Mutual funds has good services as per the convenience of the investor they often provide services such as check writing.
- Mutual funds are thoroughly regulated by the government SEC.
- Mutual funds are easy to compare because all the mutual funds required to report the same information
Mutual funds have fees during investing the fund and it has less control over timing of recognition of gains and we cannot predict the income and it is less predictable income and there are less number of opportunities’ to customize
In creating the mutual funds one researcher credits in 1774 it was first established in Europe and it was introduced in 1900’s to the rest of the world
- ICICI prudential Balanced Fund
It is one of the popular fund it was introduced by ICICI from the last five years it have mopped with some good returns it is the stable and balanced fund and it has some top holdings such as reliance India, HCL, tech, Bajaj for direct government securities it has 15% of assets and for debt option it has simple quality of liquid plans
- HDFC Balanced fund
It has nearly 19% of CAGR with a track record of five years and it has AUM of 1920 crores this is one of the best mutual funds it was founded by chirag setalvad who had a vast experience and good track record in the field of mutual funds.
It was started in 2000 at present it is holding HDFC bank, Reliance Infosys and SBI the most important advantage of HDFC balanced fund is its debt portion
- TATA Balanced Fund’
It has the potential to perform ahead it has got 16%CGAR over the last 5 years and a last 3years it has23.5% of CGAR and it has good potential and very descent the NAV is around RS 152
- HDFC Prudence Fund
This fund is one of the most popular and has very good assets under the management the head of HDFC Prudence Fund is prashant jain and it has good fame in the mutual fund industry the fund is around 17%CGAR in the last 5 years it is suitable and comfortable to the conservative investors it has heavy holdings like Infosys SBI, ICICI bank etc it is one of the less risk taking it is the best choice for the people above 45 years and need to moderate the risk
- BIRLA SUNLIFE 95 FUND
It is managed by Mahesh patil it has top holdings of balanced fund like Reliance HDFC bank TATA motors Mauriti Suzuki it has many diluting returns it is one of the oldest funds and started in 1995 and it had a good track record
The growth of mutual funds involves three steps and a bull market for both shares and stocks and many new products was introduced like including tax exempt bond and target date funds and wider distribution of fund shares and the new plans were the retirement plans and many people preferred the fast growing retirement plans and other defined contribution plans and individual retirement accounts and in 2008 total mutual funds in the financial crisis of 2007 and 2008
In 2003 the mutual and balanced fund industry involved in a scandal due to the uneven treatment of fund of stock holders some fund management companies allowed favored investors to start engage in late trading which is a illegal or market timing and the practice is prohibited by the fund policy.
Money market generally strive to maintain $1 per share net asset value and meaning is that investors earn the interest income from the fund but there is no liquidity of capitals or losses if a mutual fund fails to maintain $1 per share net asset and it has declined its value