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    Benefits Of Investing In Mutual Funds
    Benefits Of Investing In Mutual Funds
    Benefits Of Investing In Mutual Funds
    Ebook83 pages43 minutes

    Benefits Of Investing In Mutual Funds

    By Mayank Arora

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    About this ebook

    When three Boston securities executives pooled their money together in 1924 to create the first mutual fund, they had no idea how popular mutual funds would become. The idea of pooling money together for investing purposes started in Europe in the mid-1800s. The first pooled fund in the U.S. was created in 1893 for the faculty and staff of Harvard University. On March 21st, 1924 the first official mutual fund was born. It was called the Massachusetts Investors Trust.

    After one year, the Massachusetts Investors Trust grew from $50,000 in assets in 1924 to $392,000 in assets (with around 200 shareholders). In contrast, there are over 10,000  mutual funds in the U.S. today totaling around $7 trillion (with approximately 83 million individual investors) according to the Investment Company Institute.

    LanguageEnglish
    PublisherMay
    Release dateFeb 11, 2017
    ISBN9781386474258
    Benefits Of Investing In Mutual Funds

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    Book preview

    Benefits Of Investing In Mutual Funds - Mayank Arora

    INTRODUCTION

    AN OVERVIEW ON MUTUAL FUNDS:-

    HISTORY OF MUTUAL FUNDS:-

    In 1774, a Dutch merchant invited subscriptions from investors to set up an investment trust by the name of Eendragt Maakt Magt (translated into English, it means, ‘Unity Creates Strength’), with the objective of providing diversification at low cost to small investors. Its success caught on, and more investment trust were launched, with verbose and quirky names that when translated read ‘profitable and prudent’ or ‘small maters grow by consent. The foreign and colonial Govt. trust, formed in London in 1868, promised ‘start ‘the investor of modest means the same advantages as the large capitalist... by spreading the investment over a number of stock.

    When three Boston securities executives pooled their money together in 1924 to create the first mutual fund, they had no idea how popular mutual funds would become. The idea of pooling money together for investing purposes started in Europe in the mid-1800s. The first pooled fund in the U.S. was created in 1893 for the faculty and staff of Harvard University. On March 21st, 1924 the first official mutual fund was born. It was called the Massachusetts Investors Trust.

    After one year, the Massachusetts Investors Trust grew from $50,000 in assets in 1924 to $392,000 in assets (with around 200 shareholders). In contrast, there are over 10,000 mutual funds in the U.S. today totaling around $7 trillion (with approximately 83 million individual investors) according to the Investment Company Institute.

    HISTORY OF MUTUAL FUNDS IN INDIA:-

    The Evolution:

    The formation of Unit Trust of India marked the evolution of the Indian mutual fund industry in the year 1963. The primary objective at that time was to attract the small investors and it was made possible through the collective efforts of the Government of India and the Reserve Bank of India. The history of mutual fund industry in India can be better understood divided into following phases:

    Phase 1. Establishment and Growth of Unit Trust of India - 1964-87: 

    Unit Trust of India enjoyed complete monopoly when it was established in the year 1963 by an act of Parliament. UTI was set up by the Reserve Bank of India and it continued to operate under the regulatory control of the RBI until the two were de-linked in 1978 and the entire control was tranferred in the hands of Industrial Development Bank of India (IDBI). UTI launched its first scheme in 1964, named as Unit Scheme 1964 (US-64), which attracted the largest number of investors in any single investment scheme over the years.   UTI launched more innovative schemes in 1970s and 80s to suit the needs of different investors. It launched ULIP in 1971, six more schemes between 1981-84, Children's Gift

    Growth Fund and India Fund (India's first offshore fund) in 1986, Mastershare (Inida's first equity diversified scheme) in 1987 and Monthly Income Schemes (offering assured returns) during 1990s. By the end of 1987, UTI's assets under management grew ten times to Rs 6700 crores.

    Phase II. Entry of Public Sector Funds - 1987-1993:

    The Indian mutual fund industry witnessed a number of public sector players entering the market in the year 1987. In November 1987, SBI Mutual Fund from the State Bank of India became the first non-UTI mutual fund in India. SBI Mutual Fund was later followed by Canbank Mutual fund, LIC Mutual Fund, Indian Bank Muatual Fund, Bank of India Mutual Fund, GIC Mutual Fund and PNB Mutual Fund. By 1993, the assets under management of the industry increased seven times to Rs. 47,004 crores. However, UTI remained to be the leader with about 80% market share.

    ––––––––

    Phase III. Emergence of Private Secor Funds - 1993-96: 

    The permission given to private sector funds including foreign fund management companies (most of them entering through joint ventures with Indian promoters) to enter the mutal fund industry in 1993, provided a wide range of choice to investors and more competition in the industry. Private funds introduced innovative products, investment techniques and investor-servicing technology. By 1994-95, about 11 private sector funds had launched their schemes.

    Phase IV. Growth and SEBI Regulation - 1996-2004: 

    The mutual

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