Mutual Funds Essay

think of a mutual fund as a company that brings together a group of people and invests

Morningstar Incorporated makes investing easier for individuals because their focus is on the people they do business. Per their case study, Joe Mansueto created a concise and detailed log of information for the different funds available called the Mutual Fund Sourcebook (Ferrell, Hirt, Ferrell, 2009). This sourcebook guides investors into making decisions that can fit their needs. They use a five-star rating for investors to rate the companies based on who has the highest rate of return (Ferrell et al., 2009). The score helps clients understand what works in their portfolio. Investors stay current on price changes and earnings all while displaying strengths and weaknesses throughout the process (Morningstar, 2017). Other information provided

This number only got larger, and by the end of 2000 there was more money in mutual funds than there was in the entire banking system. By this time, there were actually more mutual funds than there were stocks listed on the New York Stock Exchange and the Nasdaq combined. Americans were pouring money into these investments with an almost religious fervor, under the assumption that they were all going to become filthy rich.

The mutual fund concept was simple, allow the un-sophisticated investor access to the strategies of the professional money manager. This was done by pooling small sums of money, as little as $20.00 deposited monthly. In return, the fund company would use professional money managers using professional investment strategies to easily out perform traditional bank savings products.

The equity funds invest a major portion of their assets in the stock market with an objective of giving comparatively higher returns. The degree of risk exposure of the investor is moderate to high. These funds are apt for investors who are looking for returns over a long term horizon.

During the decade of the 1990’s through the year 2001 there were some major shifts in the deployment of investment assets. Based on a variety of measures, mutual funds grew dramatically as vehicles for investing in portfolios of stock. Specifically net cash flows into equity funds grew from $13 billion in 1990 to $310 billion in the year 2000.1 During that same period the number of equity funds rose from 1,100 to 4,395, while the number of accounts in those funds increased from 22 million to 162 million. The cumulative effect of the new money injected into equity funds, together with reinvestment of dividends, plus the attendant stock price appreciation has produced a phenomenal

Those who are interested in understanding investment opportunities would benefit by understanding what a mutual fund is and how it works. Mutual funds are collections of stocks, bonds and other investments, which are operated by money managers. The companies that manage mutual funds are able to use the financial input of numerous investors to manage diverse investments in collections called portfolios. These portfolios are subject to investment objectives that are explained in the prospectus of the fund.

Some investors have told me that they prefer mutual funds to individual stocks because a fund 's price can be checked daily in the paper. Also, some feel it is simpler to invest in a fund because there is little paperwork to review (no confirmation slips to worry about). Others think that by investing in a no-load mutual fund they avoid the transaction fees of brokers. However, such arguments either make virtues out of the faults that are characteristic of mutual funds, or they are simply wrong.

With mutual funds, you invest in a collective group of securities, bonds, and stocks, unlike in dividends where you only get to invest in stocks from a specific company. If your collective group of stocks performs well, you are liable to even more revenue.

A Mutual fund is a trust that pools the investments of a number of stakeholders who share a mutual financial aim. The money thus composed is then capitalized in capital market instruments such as shares, debentures and other securities. The income received through these funds and the capital increases understood are shared by its element holders in amount to the number of units kept by them. Thus a mutual fund is the most appropriate investment of the common man as it offers a chance to invest in an expanded, skillfully managed basket of securities at a comparatively low cost. The flow chart below defines largely the working of mutual funds.

It took another 150 year for pooled investments to arrive to the United States. On March 21, 1924, Massachusetts Investors Trust launched the first modern day mutual fund, providing individual investors with a cost effective way to achieve a diversified portfolio. Moreover, individual investors gained the benefit of having their investments managed by professionals. Since then, academics and practitioners alike have debated ad nauseam the value-add delivered by fund managers. Jensen (1968) evaluated the performance of mutual funds from 1945 to 1964 and concluded that on average, fund managers were not able to predict security prices well enough to outperform the market. Concurring with Jensen, Samuelson (1974) found that it was nearly impossible to find a fund manager who can outperform the market by holding a subset of securities of the market. Henceforth, Samuelson advocated for the creation of a naïve portfolio that tracks the S&P 500 Index (a market proxy). On August 31, 1976, the Vanguard Group launched the first index fund for individual investors, the First Index Investment Trust. The introduction of this index fund initiated the active-passive debate; the persistent dialogue around mispriced securities sustains

In the past, private individuals and large institutions have largely invested in actively managed mutual funds, such as Fidelity, in which fund managers choose stocks with one goal - to surpass the market.

Mutual fund is a fund that exhibitions as a wander vehicle, pools the trusts of different theorists to place assets into distinctive budgetary instruments like stocks, securities, debentures, et cetera engaging monetary experts to achieve their money related targets. SEBI (Mutual Funds) Regulation 1993, describes Mutual Fund as "Normal Fund intimates a trust secured as a trust by a sponsor to raise money by the trustee through the offer of units to the all inclusive community under one or more plans for placing assets into securities according to these regulations".

A mutual fund and also known as unit trust can be defined as a form of collective investments that allows the investors which have similar investment objectives to pool their funds to be invested in a portfolio of securities or other assets. The fund managers will invest the pooled funds in the portfolio fund, particularly include some assets like cash, bonds, deposits, stocks, commodities and also properties parallel to the fund’s objectives. Each investor owns shares, which represent a portion of the holdings of the fund.

A Mutual fund is a trust that pools the investments of a number of stakeholders who share a mutual financial aim. The money thus composed is then capitalized in capital market instruments such as shares, debentures and other securities. The income received through these funds and the capital increases understood are shared by its element holders in amount to the number of units kept by them. Thus a mutual fund is the most appropriate investment of the common man as it offers a chance to invest in an expanded, skillfully managed basket of securities at a comparatively low cost. The flow chart below defines largely the working of mutual funds.