An Overview of Mutual Funds

Mutual Funds are a pool of funds collected from many investors in order to purchase stocks, bonds, and other investments in greater amounts. Mutual funds are shares of ownership in a group of companies.

think of a mutual fund as a company that brings together a group of people and invests

For the majority of working Americans, the most common vehicle for owning mutual funds is through their employer's retirement plan, but very few people are making the most of this mainstay of retirement planning.

A mutual fund manager is a person who actively buys or sells and sometimes both funds. They are experienced in implementing a funds strategy used for investing and manages its trading activities as well as the portfolio. Choosing whether or not to invest in Ford Motor Company will take the use of a SWOT analysis and learning about the stakeholders of the company.

Index funds are funds in which managers buy securities in proportions similar to those included in a specified major index. Index funds involve little research or management, which results in lower management fees and higher returns than actively managed funds. Actively managed funds turn over their holdings rapidly.

Hedge funds are investment vehicles that explicitly pursue absolute returns on their underlying investments. Hedge Fund incorporate to any absolute return fund investing within the financial markets (stocks, bonds, commodities, currencies, derivatives, etc) and/or applying non-traditional portfolio management techniques including, but not restricted to, shorting, leveraging, arbitrage, swaps, etc. Hedge funds can invest in any number of strategies. Hedge fund managers typically invest money of their own in the fund they manage, which serves to align their interests with

Mutual funds are an easy, convenient way to invest, without having to worry about choosing individual stocks. A mutual fund can be defined as a single portfolio of stocks, bonds, and/or cash managed by an investment company on behalf of many investors. The investment company manages the fund, and sells shares in the fund to individual investors. When one invests in a mutual fund, they become a part-owner of a large investment portfolio, along with all the other shareholders of the fund. The fund manager invests the contributions when shares are purchased, along with money from the other shareholders. Every day, the fund manager counts up the value of all the fund's holdings, figures out how many shares have been purchased by

The equity funds invest a major portion of their assets in the stock market with an objective of giving comparatively higher returns. The degree of risk exposure of the investor is moderate to high. These funds are apt for investors who are looking for returns over a long term horizon.

There are various investment opportunities available today in financial market for an investor to avail and earn returns. An investor has different options available today ranging from bank deposits, debentures, fixed income, etc. where there is low risk as well as low return; to equity market having a higher return to higher relative risk. Mutual Fund is an investment scheme which pools money from investors to invest in a diversified portfolio of stocks. Every investor wants to invest in that investment where risk minimized and the return of investment maximized. Mutual funds investment is becoming significant all over the world and its popularity and demand is rising steadily (Nazir & Nawaz, 2010).Mutual funds in Pakistan are created and managed by Asset Management Companies and regulated by Securities and Exchage Comission of Pakistan. The investor purchase share with in the fund however the quantity of shares in issue varies consistent with demand,thus the term open ended.This implies that the value of share reflects the underlying net asset value

Some investors have told me that they prefer mutual funds to individual stocks because a fund 's price can be checked daily in the paper. Also, some feel it is simpler to invest in a fund because there is little paperwork to review (no confirmation slips to worry about). Others think that by investing in a no-load mutual fund they avoid the transaction fees of brokers. However, such arguments either make virtues out of the faults that are characteristic of mutual funds, or they are simply wrong.

It took another 150 year for pooled investments to arrive to the United States. On March 21, 1924, Massachusetts Investors Trust launched the first modern day mutual fund, providing individual investors with a cost effective way to achieve a diversified portfolio. Moreover, individual investors gained the benefit of having their investments managed by professionals. Since then, academics and practitioners alike have debated ad nauseam the value-add delivered by fund managers. Jensen (1968) evaluated the performance of mutual funds from 1945 to 1964 and concluded that on average, fund managers were not able to predict security prices well enough to outperform the market. Concurring with Jensen, Samuelson (1974) found that it was nearly impossible to find a fund manager who can outperform the market by holding a subset of securities of the market. Henceforth, Samuelson advocated for the creation of a naïve portfolio that tracks the S&P 500 Index (a market proxy). On August 31, 1976, the Vanguard Group launched the first index fund for individual investors, the First Index Investment Trust. The introduction of this index fund initiated the active-passive debate; the persistent dialogue around mispriced securities sustains

Mutual funds have the same concepts as stocks; if the company makes a profit then you will earn dividends. If the company does poorly so will your investment. When you invest in mutual funds you will have a professional investment manager who buys and sell securities on you part, which to some investors can be a turn off. Many investors prefer to select all their own stocks and bonds and to rigorously check financial histories and record before making a choice. Other times people who maybe do not know how to properly investigate before investing or more times than none just do not have the funds sufficient enough to invest.

Mutual Fund have emerged as strong financial intermediaries and have helped in increasing the growth of Indian economy. Mutual Fund have provided financial stability and rationalised the resource allocation process. The Mutual Fund industry has grown from a monopoly market to a competitive market through the following phases:-

Mutual fund investors enjoy the benefits of portfolio diversification, professional management at low cost and greater transparency compared to other financial institutions, such as banks, thrifts, insurance companies and pension funds.

Savings form an important part of the economy of any nation. With savings invested in various options available to the people, the money acts as the driver for growth of the country. Indian financial systems too present multiple avenues to the investors. 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. Each mutual fund scheme has a defined investment objective and strategy. Mutual fund is a trust that pools money from a group of investors (sharing common financial goals) and invest the money thus collected into asset classes that match the stated investment objectives of the scheme. Since the stated investment objectives of a mutual fund scheme generally form the basis for an investor 's decision to contribute money to the pool, a mutual fund can not deviate from its stated objectives at any point of time. From above backdrop the present study analysis role of mutual fund in general & Future Prospects of Mutual Fund Industry in India in particular.