Role of Mutual Fund in the development of Ind...

Role of Mutual Fund in the development of Indian Economy

Author Name : Mrs. Yeshu

DOI: https://doi.org/10.56025/IJARESM.2022.1063974

ABSTRACT

Mutual fund industry has experienced a drastic growth within the past twenty years. Increase within the number of schemes with increased mobilization of funds in the past few years provide benefits to the importance of Indian mutual funds industry to Indian Economy. To satisfy the expectations of many retail investors, the mutual funds are required to function as successful institutional investors. Proper assessment of varied fund performance and their comparison with other funds helps retail investors for creating investment decisions. Mutual fund is an instrument of investing money. The  Securities and  Exchange Board  of India  (Mutual Funds) Regulations, 1996 defines a  mutual  fund  as a fund established in the  form  of  a trust to raise money through the  sale  of units to the public or a section of the public under one or more schemes for investing in securities, including money market goal. Instruments‘. A mutual fund is thus, a trust that pools the savings of a number of investors who share a common financial Anybody with an investible surplus of as little as a few hundred rupees can invest in mutual funds. These investors buy units of a particular mutual fund scheme that has a defined investment objective and strategy. The fund‘s manager uses the money collected to purchase securities such as stocks and bonds. The securities purchased are referred to as the  fund‘s portfolio. The income earned through these investments and capital appreciation realised by the scheme are shared by its unit-holders in proportion to the number of units owned by them. Thus, a mutual fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost.  The mutual fund is structured around a fairly simple concept, the mitigation  of risk through  the spreading  of investments across multiple entities, which is achieved by the pooling of a number of small investments into a large bucket. There are many advantages of mutual funds. Mutual fund is a special type of institutional device or an investment vehicle through which the investors pool their savings which are to be invested under the guidance of a team of experts in  wide variety of portfolios of corporate securities in such a way, so as to minimize risk, while ensuring safety and steady return on investment. It forms an important segment of the capital market, providing the benefits of a diversified portfolio and expert fund management to a large number, particularly small investors. Mutual fund investment increases the purchasing power of investors. It ensures reduction in the transactions cost as the economies of operation are at a large scale. It facilitates money management by professionals at a low cost.  It is also convenient for   investors to invest money also track the performance of the money invested. It provides flexibility for the investor to change the investment objective. Therefore, mutual funds play an important role in mobilizing the savings of small investors and channelizing the same for productive ventures in an economy like India. This paper examines the role of mutual funds in the development of economy of India.