Mutual Funds And Its Role
Post on 03,March 2012   10:48 AM
By - Mr. Om Singh
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Mutual funds are a vehicle to mobilize moneys from investors, to invest in different markets and securities, in line with the investment objectives agreed upon, between the mutual fund and the investors.

Role of Mutual Funds

Mutual funds perform different roles for different constituencies. Their primary role is to assist investors in earning an income or building their wealth, by participating in the opportunities available in various securities and markets.
It is possible for mutual funds to structure a scheme for any kind of investment objective.

Thus, the mutual fund structure, through its various schemes, makes it possible to tap a large corpus of money from diverse investors.

Therefore, the mutual fund offers schemes. In the industry, the words ‘fund' and ‘scheme' are used inter-changeably. Various categories of schemes are called "funds".

In order to ensure consistency with what is experienced in the market, this Workbook goes by the industry practice. However, wherever a difference is required to be drawn, the scheme offering entity is referred to as "mutual fund" or "the fund"

The money that is raised from investors, ultimately benefits governments, companies or other entities, directly or indirectly, to raise moneys to invest in various projects or pay for various expenses.

As a large investor, the mutual funds can keep a check on the operations of the investee company, and their corporate governance and ethical standards.

The projects that are facilitated through such financing, offer employment to people; the income they earn helps the employees buy goods and services offered by other companies, thus supporting projects of these goods and services companies. Thus, overall economic development is promoted.

The mutual fund industry itself, offers livelihood to a large number of employees of mutual funds, distributors, registrars and various other service providers.

Higher employment, income and output in the economy boost the revenue collection of the government through taxes and other means.

When these are spent prudently, it promotes further economic development and nation building. Mutual funds are therefore viewed as a key participant in the capital market of any economy.

 


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