What are Mutual Funds ? How do they work ?
Mutual Funds is where investments are collected from various investors and is invested in securities like stocks, government securities, etc. By investing in Mutual Funds the investor becomes a part owner of the assets.
A Mutual fund is constituted in the form of a trust. The sponsor sets up the business, the asset management company invests the money and the trustee oversees the operations.
Sponsor
A company established under the Companies Act establishes a mutual fund. For example - If a Tradeplus online sets up the Tradeplus online mutual fund then Tradeplus online is the sponsor company.
Trustee
The trust is headed by a Board of Trustees. The trustee entity holds the property of the mutual fund in trust for the benefit the unit holders and ensures that all legal requirements in connection with the operation and functioning of the mutual fund are met.
Mutual Fund
A mutual fund is established under the India Trust Act, 1882 to raise money through the sale of units to the public for investment in the capital market. The funds so raised are handed over to the asset management company for investment. The Mutual fund is required to be registered with SEBI.
Asset Management Company
This entity is registered under the Companies Act to manage the money invested in the mutual fund and to operate the schemes of the mutual funds in accordance with the governing regulations. The AMC is thus charged with the responsibility of investing and managing the investors resources.
Unit Holder
Any person or entity holding a undivided share in the assets of a mutual fund scheme is called as unit holder.
How does a mutual fund operate
A mutual fund collects money from several investors and invests it in various options like stocks, bonds, etc. This fund is managed by professional who understands the market well, and try to accomplish growth by making strategic investments. Investors get units of mutual fund according to the amount they have invested. The AMC is responsible for managing the investments for the various schemes operated by the mutual fund. It also undertakes activities such like advisory services, financial consulting, customer services, accounting, marketing and sales functions for the schemes of the mutual fund.
Investment in Mutual Funds is generally seen as the best way to participate in Equity Markets if you choose to leave the Funds Management to experts. Investments in Mutual Funds can be either as lump Sum investment or through Systematic Investment Plans (SIPs).
Selecting the best platform for the investment is very important. My recommendation would be to go through Tradeplus online as it provides the best pathway to start your trading. They provide many services which will help amateurs and professional traders with insights about the market and to gain knowledge and experience about trading.
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