mutual fund

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“A mutual fund is a trust that pools the savings of a number of investors with common financial goals”. INTRODUCTION: The collected money is invested in various instruments like debentures, shares, etc. The income generated from these instruments and the capital appreciation is shared by the investors in proportion to the number of units owned by them

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Mutual Fund Operation Flow Chart

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History of Mutual Fund The concept of mutual fund by UTI in the year 1963. Though the growth was slow, but it accelerated from the year 1987 when non-UTI players entered the industry. The mutual fund industry can be broadly put into four phases according to the development of the sector.

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First Phase - 1964-87 Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. The first scheme launched by UTI was Unit Scheme 1964. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. At the end of 1988 UTI had Rs.6,700 crores of assets under management.

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Second Phase - 1987-1993 (Entry of Public Sector Funds) SBI Mutual Fund was the first followed by Canbank Mutual Fund (Dec 1987) Punjab National Bank Mutual Fund (Aug 1989), Indian Bank Mutual Fund (Nov1989). Bank of India (Jun 1990), LIC in 1989 and GIC in 1990. Bank of Baroda Mutual Fund (Oct 1992). The end of 1993 marked Rs.47,004 as assets under management.

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Third Phase - 1993-2000 (Entry of Private Sector & Foreign Funds) The Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993. Association of Mutual Funds in India (AMFI) was incorporated on 22nd August, 1995. At the end of January 2000, there were 33 mutual funds with total assets of Rs. 1,21,805 crore. The Unit Trust of India with Rs.44,541 crore (Asset value)

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Fourth Phase - since February 2003 This phase had bitter experience for UTI. It was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with AUM of Rs.29,835 crores (as on January 2003). The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76,000 crores of AUM and with the setting up of a UTI Mutual Fund,

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Types of mutual funds: By structure Open-ended funds Close-ended funds Interval By Investment objective Growth funds Income funds Balanced funds Money market funds

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CONT………….. Other schemes Tax saving schemes Special schemes Index funds Sector specific schemes

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Why choose Mutual Funds? Affordability Professional management Diversification Convenience Liquidity Tax breaks Transparency Low Cost Flexibility Variety of schemes Protection through regulation

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Drawbacks of Mutual Funds No Guarantees Fees and commissions Management risk

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