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Introduction to Mutual Funds

Mutual funds pool money from many investors and invest it in stocks, bonds, and other securities. They make investing accessible for small investors by providing diversification and professional management. Some key advantages of mutual funds include diversification, liquidity, and convenience. However, they also have some drawbacks like hidden costs, lack of control, and taxes. Overall, mutual funds provide an easy way for investors to get exposure to the market without having to spend a lot of time researching investments. Investors should use them for diversification rather than expecting superior performance over other options.

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Pankaj Bhardwaj
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30 views10 pages

Introduction to Mutual Funds

Mutual funds pool money from many investors and invest it in stocks, bonds, and other securities. They make investing accessible for small investors by providing diversification and professional management. Some key advantages of mutual funds include diversification, liquidity, and convenience. However, they also have some drawbacks like hidden costs, lack of control, and taxes. Overall, mutual funds provide an easy way for investors to get exposure to the market without having to spend a lot of time researching investments. Investors should use them for diversification rather than expecting superior performance over other options.

Uploaded by

Pankaj Bhardwaj
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd

MUTUAL FUNDS

 
PRESENTED BY :- POOJA NAGAR
INTRODUCTION
Over the past decades mutual funds have grown
intensely in popularity and have experienced a
considerable growth rate. Mutual funds are popular
because they make it easy for small investors to invest
their money in a diversified pool of securities. As the
mutual fund industry has evolved over the years, there
have arisen many questions about the nature of
operations.
DEFINITION
As per the US Securities and Exchange Commission, a
mutual fund is a company that pools money from
many investors and invests the money in stocks,
bonds, short-term money-market instruments, other
securities or assets, or some combination of these
investments. Each share represents an investor’s
proportionate ownership of the fund’s holdings and the
income those holdings generate. Mutual funds have a
fund manager who invests the money on behalf of the
investors by buying / selling stocks, bonds etc.
CHARACTERISTICS
1. Shares of a mutual fund are bought from the fund itself (or through
a broker for the fund); they
Can‘t be bought on a secondary market like NYSE or NASDAQ.

2. On purchase, investors pay an amount equal to the fund's per share


net asset value (NAV) plus any shareholder fees that the fund imposes
at the time of purchase (such as sales loads).
 
3. Redemption is a feature which allows shares of a mutual fund to be
sold back by the investor to the fund at their approximate per share
NAV, minus any fees the fund imposes at that time (such as deferred
sales loads or redemption fees).
Contd……
4. Being 'open-ended’ allows mutual funds to create and
sell new shares to accommodate new investors. In other
words, they sell their shares on a continuous basis,
although some funds stop selling when, for example,
they become too large.

5. The investment portfolios of mutual funds typically


are managed by separate entities known as “investment
advisers” that are registered with the SEC.
Types of Mutual Funds

 Money market mutual funds.

 Bond/fixed income mutual funds.

 Stock funds.
Structure of Mutual funds
Why We Invest in Mutual
Funds??
Mutual funds make saving and investing simple, accessible, and
affordable. Mutual fund offers certain advantages to individual,
amateur investors who trade in small denominations.
 Professional management
 Diversification
 Economies of Scale
 Liquidity
 Convenience
 Protecting Investors
Drawbacks

 Hidden costs
 Lack of control
 Dilution
 Price Uncertainty
 Taxes
Conclusion
 The idea of mutual funds came into existence for the layman to get a piece of the
market. For this purpose, they were created by professionals who built a
portfolio of stocks based on their understanding of the market, so that its
investors need not spend time buried in financial pages of Wall Street Journal or
any other financial daily. The underlying benefit was risk diversification without
having the need to dedicate any time to studying and following the markets .
 The conclusion most performance measurement studies draw from long
term studies is that the returns an investor earns by investing in mutual
funds are in-line with or less than what the investor should have earned
based on the risk taken. Even if some mutual fund managers have superior
skills, they charge fees commensurate with their skills, so that the benefits
of their skills accrue to them and not to the investors. Investors, therefore,
should invest in mutual funds for reasons of diversification, and not
necessarily for superior performance.

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