Define Mutual Fund

Question

What do you understand by the term ‘Mutual Fund’? And also write down its types of schemes?

Answer 1

Mutual Fund is an organization that contributes the savings of the investors who share ordinary financial goals. The money gathered through the number of investors is invested in various kinds of financial instruments for the mutual advantage of its members. The income earned on such investments is then shared through the unit holders in proportion to the number of units detained by them. A mutual fund has trustees, sponsor, asset Management Custodian and company. Mutual funds schemes are categorized on the following basis which is illustrated below:

- Maturity Period - Open ended and closed ended schemes.
- Investment Objective - Growth scheme, balanced scheme, and Income scheme.
- Other schemes - Liquid fund, Gilt fund Index fund, Sector fund and Tax saving fund.