Page 147 - DMGT512_FINANCIAL_INSTITUTIONS_AND_SERVICES

Financial Institutions and Services

Notes 9.7 Summary

Mutual funds can be described as open-ended funds operated by an investment company
which raises money from shareholders and invests in a group of assets, in accordance with
a stated set of objectives.
In return for the money they give to the fund when purchasing shares, shareholders
receive an equity position in the fund and, in effect, in each of its underlying securities.
For most mutual funds, shareholders are free to sell their shares at any time, although the
price of a share in a mutual fund will fluctuate daily, depending upon the performance of
the securities held by the fund. Benefits of mutual funds include diversification and
professional money management.

There are many types of mutual funds like Value stocks, Growth stock, Based on company
size, large, mid, and small cap, Income stock, Index funds, Enhanced index, Stock market
sector, Defensive stock, International, Real estate, Socially responsible, Balanced funds,
Tax efficient, Convertible, Junk bond, Mutual funds of mutual funds, Closed end, Exchange
traded funds, etc.
Mutual funds have emerged as the best in terms of variety, flexibility, diversification,
liquidity as well as tax benefits.

Besides, through MFs investors can gain access to investment opportunities that would
otherwise be unavailable to them due to limited knowledge and resources.
MFs have the capability to provide solutions to most investors' needs, however, the key is
to do proper selections and have a process for monitoring.

9.8 Keywords

Balanced funds: The investor may wish to balance his risk between various sectors such as asset
size, income or growth. Therefore the fund is a balance between various attributes desired.
Defensive stock: The securities in this fund are chosen from a stock which usually is not impacted
by economic down turns.
Offer document: Any document by which a mutual fund invites public for subscription of units
of a scheme.

9.9 Self Assessment

Fill in the blanks:
1. Most funds have a particular ..................... they focus on when investing.
2. Tax efficient mutual fund aims to .................. tax bills, such as keeping turnover levels low
or shying away from companies that provide dividends.
3. UTI Mutual Fund was created as a ..................... registered fund.
4. Unit Trust of India was created by the UTI Act passed by the Parliament in ................
5. ..................... are the stocks from firms with relative low Price to Earning (P/E) Ratio,
usually pay good dividends.
6. Morgan Stanley is a worldwide financial services company and it's leading in the market
in ........................, ..................... and credit services.

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