Mutual Funds in India Info: # Part 1

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What is Mutual Funds?

A Mutual Fund is a trust that collects money from many investors and invest in various asset classes (equity,debt,liquid asset,etc).

It is called "Mutual" because all the profit, loss, risks and dividends from the investments are shared among all the investors according to their contributions.

History Of Mutual Funds

Unit Trust of India (UTI) was the first mutual fund set up in India in the year 1963.

In early 1990s, the Government allowed public sector Banks and Institutions to set up mutual funds.

In the year 1992, Securities and Exchange Board of India (SEBI) Act was established. The objectives of SEBI are:

  1. To formulate policies and regulates the mutual funds.
  2. To protect the interest of investors.
  3. To promote the development of securities market.
  • In 1993, SEBI notified regulations for the mutual funds.
  • After 1993, Private sector companies started to offer mutual funds.
  • In 1996, the regulations were completely revised and updated.
  • Thereafter, SEBI issued guidelines to Mutual Funds from time to time to protect the interest of investors.

Types of Mutual Funds:

There are a variety of mutual funds and it causes confusion to the common people. The following list will help you to understand better.

Types of Mutual Funds by Company Size:

  1. Large Cap Funds
  2. Mid-Cap Funds
  3. Small Cap Funds

Types of Mutual Funds by Structure:

  1. Open ended schemes
  2. Closed ended schemes
  3. Interval Schemes

Types of Mutual Funds by Investment Objective:

  1. Equity Schemes
  2. Income or Debt Schemes
  3. Balanced schemes
  4. Money Market or Liquid Schemes
  5. Tax Saving Schemes
  6. Gilt Schemes
  7. Index Schemes
  8. Sector Schemes
  9. Exchanged Traded Funds
  10. Fund of Funds Schemes

Types  of Mutual Funds by Payout:

  1. Growth schemes
  2. Dividend Payout schemes
  3. Dividend Re-investment schemes
A mutual fund is described as combination of the funds mentioned above. For example,

  •  A large cap open ended equity scheme with growth option.
  •  A small cap open ended debt scheme with dividend option
  •  A large cap close ended balanced scheme with dividend option
You can see the details about each type of Mutual Funds in the upcoming posts.




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