Friday, January 28, 2011

Mutual Funds in INDIA

A mutual fund is a professionally managed type of collective investment scheme that pools money from many investors and invests typically in investment securities like stocks, bonds, other mutual funds, other securities, and/or commodities. The mutual fund will have a fund manager that trades (i.e. buys and sells) the fund's investments in accordance with the fund's investment objective. Mutual funds can be defined as the money-managing systems that are introduced to professionally invest money collected from the public. The Asset Management Companies (AMCs) manage different types of mutual fund schemes. The AMCs are supported by various financial institutions or companies.
The origin of the Indian mutual funds industry dates back to 1963 when the Unit Trust of India (UTI) came into existence at the initiative of the Government of India and the Reserve Bank of India. Since then the mutual funds sector remained the sole fiefdom of UTI till 1987 when a slew of non-UTI, public sector mutual funds were set up by nationalized banks and life insurance companies. The year 1993 saw sweeping changes being introduced in the mutual fund industry with private sector fund houses making their debut and the laying down of comprehensive mutual fund regulations. Over the years, the Indian mutual funds industry has witnessed an exponential growth riding piggyback on a booming economy and the arrival of a horde of international fund houses.In India, Fund Managers manage the mutual funds. They are also referred to as portfolio managers. The mutual funds in India are regulated by the Securities Exchange Board of India.
Types of Mutual Funds
Mutual funds have different structure and aims, which in turn enable us to classify them into various major categories. These categories are:
  • Closed-end mutual funds
  • Open end funds
  • Equity mutual funds
  • Mid cap funds
  • Large cap funds
  • Growth funds
  • Balanced funds
  • Exchange Traded Funds (ETFs)
  • Load mutual funds and No-Load mutual funds
  • Value funds
  • International mutual funds
  • Money market funds
  • Sector mutual funds
  • Fund of funds (FoF)
  • Index funds
  • Regional mutual funds
Benefits of Mutual Funds

Mutual funds are preferred for their cost-effectiveness and easy investment process. By investing all the money in a mutual fund, investors can buy stocks or bonds at lower trading charges. This is indeed one of the main benefits, which is not available otherwise. You don't need to see which stock or bond would be better to buy. Another advantage is diversification. Diversification stands for diffusing money across various different categories of investments. There is every possibility that when one investment is down, the other can be up. In simple terms, this is helpful in reducing risks. Transparency, flexibility, professional investment management, variety and liquidity are some of the other benefits of the mutual funds, which are not found in case of other investments to such an extent.

Some of the popular firms that deal in mutual funds in India are:
  • Reliance Mutual Funds
  • HDFC
  • ABN Amro
  • AIG
  • Bank of Baroda
  • Canara Bank
  • Birla Sun Life
  • DSP Merrill Lynch
  • DBS Chola Mandalam AMC
  • Escorts Mutual
  • Deutsche Bank
  • ING
  • HSBC
  • ICICI Prudential
  • LIC
  • JP Morgan
  • Kotak Mahindra
  • Lotus India
  • JM Financial
  • Morgan Stanley
  • State Bank of India (SBI)
  • Sahara Mutual Funds
  • Sundaram BNP Paribas
  • Taurus Mutual Funds
  • Tata
  • UTI
  • Standard Chartered  

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