DHANAVRUKSHA
A mutual fund is a financial vehicle that pools money from multiple investors to purchase securities like stocks, bonds, and other assets. Managed by professional portfolio managers, mutual funds provide individual investors access to diversified portfolios and professional management, helping to reduce risks associated with individual security investments.
The pooled funds are managed by a professional investment company, which makes decisions on behalf of the investors to generate returns through interest, dividends, or capital gains.
A well-planned strategy helps diversify risk and optimize potential returns based on market trends and investor goals.
Investors earn returns through capital appreciation, dividends, and interest based on their chosen mutual fund scheme.
Mutual funds provide professional money management, making them ideal for investors who lack the time or expertise to manage their portfolios.
Mutual funds buy and sell large quantities of securities, resulting in lower transaction costs for investors.
Investing in mutual funds is simple, with minimum investments starting as low as Rs. 500 per month.
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Online investing is quick, convenient, and accessible, with real-time data, low fees, and automated tools for easy decision-making.
The mutual fund industry in India has evolved through five key phases, marked by regulatory reforms, technological advancements, and growing investor participation.
The origin of mutual funds in India began with the establishment of the Unit Trust of India (UTI) in 1963. UTI launched its first scheme in 1964, attracting small investors with its focus on safety and assured returns. This phase laid the foundation for mutual funds in India, with UTI being the sole player.
In 1987, SBI Mutual Fund became the first non-UTI mutual fund, marking the entry of public sector banks and financial institutions into the industry. This phase introduced new schemes, expanding investment options for retail investors.
A major turning point came in 1993 when SEBI opened the industry to private players, leading to increased competition and innovation. The introduction of Systematic Investment Plans (SIPs) in 1993 revolutionized retail investing, though SIPs gained significant traction only post-2000.
SEBI introduced reforms to enhance transparency and investor protection. Key developments included the New Fund Offer (NFO) process and consolidation of schemes, streamlining the industry and improving investor experience.
The current phase is characterized by rapid growth, driven by Direct Plans (low-cost investing) and the adoption of digital platforms. The industry has seen exponential growth in assets under management (AUM) and investor participation.