Mutual Fund

The economic development of a country depends on a lot of important factors and mutual funds are definitely one of them. Mutual funds are basically certain investment pools that are created with the collection of the money that is invested by the people in several bonds and stocks. There are some other types of investments that are included in the list as well. It is important for people to know what is a mutual fund and its role in the development of the economy. 

A mutual fund is under the management of an efficient manager who will charge all the investors with certain sums of money in order to take proper care of the investments that they make. People can easily sell or many any type of the number of different mutual funds any time they want. 

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What Does Mutual Fund Mean? 

When it comes to the creation of capital, there is no doubt that it is a huge problem that concerns all the different countries that are currently on the stage of development. In case there is an investor who has the wish of investing a certain amount of money or setting up any particular industry, the only problem there can be the capital. Now, this issue is often solved with the help of options such as mutual funds, fixed deposits, bank deposits, chit funds, etc. 

A mutual fund can be defined as a particular type of group investment act that involves several entities or individuals making their investments in a joint manner in bonds, stocks, securities, and some other short-term investment options. 

The mutual fund manager will be responsible for the entire management of the funds and he will also be able to decide the investment that is to be made in the fund. The profit, as well as the loss accounts, are also managed by the person. A certain fee is charged by the mutual fund manager in order to take proper care of the investments made by these investors. Anyone is able to make a purchase of the mutual funds or promptly sell in at any time without any difficulty. Hence, mutual funds can be considered as a proper form of investing in order to raise the economy of any particular developing country. 

It is a very important thing to keep in mind that any person at any time will be able to make an investment in mutual funds. A minimum amount of Rs. 500 is essential for making an investment in mutual funds. Also, it is essential to know that even NRIs as well as the residents of the country are able to invest in mutual funds. Not just that but the investments can also be made in the name of the spouses as well as the children of the people. These details are really important in order to understand the meaning of mutual funds. 

Types of Mutual Funds

There are different categories in which mutual funds are properly divided. This basis of division happens due to some of the factors such as the return, size, and risk of the investment. Here we have managed to mention 4 different types of mutual funds. These are essential in understanding how mutual funds work for the economy of the country. 

• Fixed Income Mutual Funds 

• Equity Funds 

• Solution-Oriented Funds 

• Hybrid Mutual Funds 

We are also going to provide some detailed explanation of these funds in order to offer a comprehensive idea to the people. 

1. Fixed Income Mutual Funds 

These basically are the types of mutual funds that tend to provide fixed returns to those who own the funds. Some of the examples of fixed income mutual funds include government bonds, corporate bonds as well as different types of debt instruments. In this type of mutual fund, a particular interest income is provided to the investors by the managers of the investors. One of the most important things to keep in mind about fixed income mutual funds is that there is a very low level of risk involved in it. 

2. Equity Funds 

According to this mutual fund scheme, the investors will directly be able to make their investments in the shares. However, these types of investments have a very high level of risk associated with them. So, why would anyone want to invest in Equity Funds, right? Well, the returns that are fixed with these types of mutual funds are really great and hence people have the scope to earn more profit. The company size tends to play a very important role in the division between small, mid, and large-cap. The individuals or entities that are interested in taking more risks and getting better returns should definitely invest in these. 

3. Solution-Oriented Funds 

As the name would suggest, these are basically those types of mutual funds that are made in order to cater to certain specific solutions or goals. Some of the major examples of such mutual funds are the education plans for children or the retirement plans that people make. In order to get the best results with the Solution Oriented Mutual Funds, one actually has to make an investment for a minimum of 5 years. 

4. Hybrid Mutual Funds 

For the 4th type of mutual funds, it can be said that these are the funds that contain investments from different types of security instruments such as bonds and stocks. The schemes in these mutual funds are basically an investment in debt as well as equity. So, the people who invest in such schemes need to ensure that they have a good look at the risk level that they are taking. So, these are the different types of mutual funds. These details are a definite help to those who want to know what is a mutual fund is. 

Some Benefits Associated With Mutual Funds 

While there are some risks that are often linked to mutual funds, it is often seen that most people tend to invest in this pool. Why is that, one might ask? Well, it is definitely due to the benefits that are associated with the mutual fund sector. 

• One of the major benefits of mutual funds has to be the diversification of several risks that get divided into debt securities and equity in the best way. 

• Investors are also allowed to make full as well as partial withdrawals of their investments at any particular time period according to the requirements that they have. 

• Investors tend to have a clear idea about the sectors where the investments of their money are being made. So, the level of transparency in the mutual fund sector is another benefit. 

• In order to invest in mutual funds, an individual will not have to make a submission of any entry fee. The investments are totally free of cost to make. 

• Some of the best experts in the industry are hired as managers of mutual funds. Hence, this sector is definitely the correct one to make investments in. The level of professional management is really good. 

• Investors are also allowed to have certain benefits such as tax exemptions in certain debt and equity funds. Not to mention that they will also be able to switch from one particular fund to another and transfer all their money as well. 

What Role Does Mutual Funds Play in Economic Development 

In order to know what is a mutual fund and its role in the development of the economy, these details will be the best help. 

Mutual funds have a very important role in play in the arrangement of funds for the purpose of investments for the country. Not to mention that it also mobilizes certain small investments made by the public as well. With the issue of capital collection that is rampant in the country, mutual funds tend to be a savior in that section as well by providing sufficient funds to those in need. It is also crucial in the general employment in the country. 

Conclusion 

It is safe to say that mutual funds are very crucial for the economic development of any country due to the benefits that it provides. With the help of mutual funds, several economical advancements can be made.