Saving and investment is the only way to fulfill the future financial need. The main objective of investment is where to keep savings to maximise return. Mostly people keep maximum part of their saving in bank saving account or fixed deposits of banks or post offices for a period according to their need. They earn small amount of interest on their savings. This is safe and conservative way of investment. To diversify your portfolio, mutual funds may be the best option. Mutual funds offer various types of funds like liquid funds, debt funds, equity funds. People can choose according to their risk apetite and expected return.
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Mutual Fund : Step by Step
| Year | With the Help | Event |
|---|---|---|
| 1963 | Reserve Bank of India and Government of India | Establishment of Unit Trust of India : Mutual Fund started |
| 1964 | Unit Trust of India launched first scheme | Unit Scheme-64 (US-64) launched |
| 1971 | UTI launched Unit Linked Insurance Plan | UTI ULIP launched |
| 1987 | UTI | UTI Master Share:A diversified Equity Scheme |
| 1987 | Divesification of Mutual Fund Business | Entrance of Public Sector Banks |
| 1987 | Entry of First Non-UTI Mutual Fund | State Bank of India : First Non-UTI Mutual Fund |
| 1993 | Permission granted for entry of Private Sector | >Private Sector entry in Mutual Fund area |
| 1996 | Securities and Exchange Board of India | Securities and Exchange Board of India (SEBI)(MF) Regulation Act 1996 came into existance |
| 2003 | Unit Trust of India was replaced by Unit Trust of India Mutual Fund. |
Mutual Fund
Mutual Fund is pool of money, collected from numerous investors and this collected money is invested according to a certain investment objective.
The history of Mutual Fund in India started with the establishment of Unit Trust of India (UTI) in 1963 at the initiative of Reserve Bank of India and the Government of India. The first scheme launched by Unit Trust of India was Unit Scheme 1964 (US-64). Unit Trust of India launched Unit Linked Insurance Plan (ULIP) in 1971. It was the first unit linked insurance plan in India. UTI launched its Master Share scheme in 1987, which could be termed as the first diversified equity investment scheme in India. In 1987 Public Sector banks entered into the area of Mutual Fund. State Bank Mutual Fund was established first non-UTI mutual fund in Nov 1987. The list of mutual funds running in India is given below.
List of Mutual Funds in India
In 1993 permission granted for the entry of private sector in the area of Mutual Fund. This step provided the Indian Investors a broader choice of funds and increasing competition. Due to this a regulatory body needed and Securities and Exchange Board of India (SEBI) (MF) Regulation Act 1996 came into existence. In Feb'2003 Unit Trust of India was replaced by Unit Trust of India Mutual Fund.
Advantages to Investors
Mutual funds offer a diversified portfolio in very small investment. They offer many advantages to investors. Some of these are given below :
* Professional Management
* Diversified Portfolio
* Liquidity
* Less Transaction Cost
* Tax Benefit
Mutual Fund Schemes
Mutual funds offer various types of schemes. Investors can choose among them according to their risk capacity, time period, expected rate of return etc.
* Open Ended Funds
* Close Ended Funds or
* Debt Funds
* Equity Funds
* Hybrid Funds
Types of Debt Funds
* Gilt Funds
* Diversified Debt Funds
* Junk Bond Funds
* Fixed Maturity Plan [FMP]
* Floating Rate Funds
* Liquid Or Money Manager Funds
Types of Equity Funds
* Sector Funds
* Diversified Equity Funds
* Growth Funds
* Thematic Funds
* Index Funds
* ELSS Funds
Systematic Investment Plan
SIP is investing a fixed sum periodically in a disciplined manner for long term. It gives benefit of Rupee Cost averaging.
Useful Abbreviations
Here some useful terminology, abbreviations and their full forms are given. I hope that it will be helpful to student of finance & investment and investors.
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