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A Mutual Fund is a trust that pools the savings
of a number of investors who share a common financial goal. These investors buy
units of a particular Mutual Fund scheme that has a defined investment
objective and strategy. The money thus collected is then invested by the fund
manager in different types of securities, which could range from shares to
debentures to money market instruments, depending upon the scheme's stated
objectives. The income earned through these investments and the capital
appreciation realised by the scheme are shared by its unit holders in
proportion to the number of units owned by them. Thus a Mutual Fund is the most
suitable investment for the common man as it offers an opportunity to invest in
a diversified, professionally managed basket of securities at a relatively low
cost.
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Worldwide, the Mutual Fund, or Unit Trust as it is called
in some parts of the world, has a long and successful history. The popularity
of the Mutual Fund has increased manifold. In developed financial markets, like
the United States, Mutual Funds have almost overtaken bank deposits and total
assets of insurance funds. In India, the Mutual Fund industry started with the
setting up of Unit Trust of India in 1964. Public sector banks and financial
institutions began to establish Mutual Funds in 1987. The private sector and
foreign institutions were allowed to set up Mutual Funds in 1993. Today, there
are 36 Mutual Funds and over 200 schemes with total assets of approximately Rs.
81,000 crores. This fast growing industry is regulated by the Securities and
Exchange Board of India (SEBI).
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