Meaning of Mutual Fund Commerce YouTube Lecture Handouts

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Topics to Be Covered Are

  • Meaning Of Mutual Fund
  • Why do people buy Mutual Fund?
  • Types of Mutual Fund
  • Factors Affecting Mutual Fund
  • How do Mutual Funds work?
  • How do Mutual Funds Generate Returns for Investors?
  • Advantages of Mutual Funds
  • Disadvantages of Mutual Funds
  • Things to Consider Before Investing in Mutual Funds

Meaning of Mutual Fund

  • Mutual fund is body corporate registered with SEBI (Securities Exchange Board of India) that pools money from individuals/corporate investors and invests the same in a variety of different financial instruments or securities such as equity shares, government securities, bonds, debentures etc.
  • Mutual funds can thus, be considered as financial intermediaries in the investment business that collects funds from the public and invest on behalf of the investors. Mutual funds issue units to the investors.

Why Do People Buy Mutual Fund?

  • Professional Management
  • Diversification
  • Affordability
  • Liquidity

Types of Mutual Fund

On the Basis of Objectives

  • Diversified Funds
  • Sector Funds
  • Index Funds
  • Tax Saving Funds
  • Debt/Income Funds
  • Liquid Funds/Money Market Funds
  • Gilt Funds
  • Balanced Funds

Types of Mutual Fund

On the Basis of Flexibility

  • Open Ended Funds
  • Close – Ended Funds

Factors Affecting Mutual Fund

  • Net asset value
  • Assets under management
  • Fund managers
  • Investment objective

How Do Mutual Funds Work?

Mutual Fund

How Do Mutual Funds Generate Returns for Investors?

  • Capital Appreciation
  • Dividend Pay-out

Advantages of Mutual Funds

  • Management
  • Dividend Reinvestment
  • Scale Advantage
  • Diversification
  • Liquidity and Simplicity

Disadvantages of Mutual Funds

  • Risk and costs
  • No Guarantees
  • No Control
  • Fees and Commission
  • Taxes
  • Selecting Right Financial Securities is not Easy
  • Unethical Practices may Creep

Things to Consider Before Investing in Mutual Funds

  • Financial goals
  • Historic performance of the fund
  • Assets Under Management (AUM)
  • Risk Tolerance of the investor