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Unit 12: Mutual Fund

(iii) Legal Advisors; Notes
(iv) Fund Officers;
(v) Underwriters/Distributors;
(vi) Legal Advisors.

All the above agencies play a major role in any mutual fund organized in the US and
other European countries, as they are separate agencies/corporations independent
of the mutual fund. However, in India so far, mutual funds have taken the services
of the following outside agencies:
(i) Registrars and Transfer Agents

(ii) Advertisers
(iii) Legal Advisors
(iv) Custodians

Self Assessment

State whether the following statements are true or false:
3. A mutual fund can be constituted either as a corporate entity or as a trust.

4. The basic difference between a corporation and a trust is that in the case of the former, the
liability is unlimited whereas in case of the latter, it is limited.

12.2.2 Advantages of Investing in Mutual Funds

By investing in various mutual funds schemes, small investors or middle-income investors seek
the following advantages compared to other types of investments:
1. Investment variety and spread in different industries.
2. Capital appreciation without having to watch the upward or downward performance
curves of different scrips.
3. No impulsive decision-making regarding purchase or sale of share/securities, since the
funds are managed by expert, professional fund managers who have access to the latest
detailed information regarding the stock market and individual scrips.

4. Liquidity through buyback arrangements of the mutual fund or listing on some stock
exchanges after a certain lock-in period.
5. Even the smallest dividend or capital gain gets reinvested, thus enhancing the effective
return.
6. Freedom from paperwork
7. Tax benefits on invested amounts/returns or dividends/capital gains

Apart from the above, other advantages of mutual funds are:
The advantages of investing in mutual funds are:
 Diversification: The best mutual funds design their portfolios so individual investments
will react differently to the same economic conditions. For example, economic conditions
like a rise in interest rates may cause certain securities in a diversified portfolio to decrease
in value. Other securities in the portfolio will respond to the same economic conditions by

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