Simple Explanation Of Mutual Fund| In 1964 The First Mutual Fund

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Simple explanation of Mutual Fund

Money should always be kept where all the rich people keep it, that is, it should be invested

 Rich people spend their money in becoming rich, that is, in investing and poor people spend their money on things that make them look rich. Making money from money is called investment now but the thing is that a common man who has only knowledge related to his goods, a shopkeeper knows only about his goods, he starts investing anywhere like this. When he does not have any knowledge, he can also suffer loss. This is absolutely correct but first of all we have to see what options a common man has. One very old and common way of investment is that you can give money to your acquaintances, friends or anyone on interest. And keep the entry rate such that it beats the inflation rate but there is a problem in this also, if the money is not returned then there is a kind of risk in this also. Keeping money in a saving account is also an investment because in that also the interest rate cannot be beaten, so some people also have a risk in this. There is a loss and your deposited money gets reduced

 

Saving Account:-

People think that a savings account is a place where you just keep money, where your money is secure and it is easy to transfer money from here to there

 

But the main process of a savings account is that we give money to the bank in a way so that it invests and then we get its entry rate back but now the entry rate that we get in a savings account is about 4% and the inflation rate which is the average inflation rate is 7.5%

 

Therefore keeping money in a savings account is considered a bad investment, so a savings account has become an account only for transacting money

 

Whenever you people go to the market, you will get the option of making different types of investments, some people invest in gold, some people buy property, some people make fixed deposits, some invest money in the share market, some people put money in government bonds or company debentures. There are many options available in the market but even after that very few people have the courage or are able to invest because there is a lot of risk and due to lack of knowledge one does not feel like investing money.

 

You people have to remember that as soon as you start investing, there is always risk involved in it. There is not a single investment in the world that does not involve risk because keeping money in a savings account is also a risk. If you look into the past, there are many banks that have been corrupt.

 

In fact, keeping money at home is also a kind of risk because if someone comes to know that you have kept a lot of money in your house, then your house also comes at risk because the chances of theft increase. That is why risk is involved everywhere in investment. It is less at some places and more at others. Now it is up to you people to decide how much risk you want to take. More risk means more profit and less risk means less profit.

 

For example, if you invest money in the stock market, then a little risk means more profit. Money should be invested in technology companies and some in oil and gas and consumer goods companies. What happens is that if a sector is in loss, then we wait for it to come up and when a sector is going up, we make our profit at the right time and withdraw from it and this is what we call investing in a diversified manner. We have understood that investing in different sectors reduces risk but to invest in different sectors we need knowledge, money and time because you have to find out about each sector and all this will take a lot of time. So one thing is confirmed that if you want to invest in different sectors, then you need a lot of money for it.

 If we talk about the share market, one share of MRF is worth more than one lakh, the price of property and gold is very high. Now you people will think that I have to diversify in gold, real estate, share market and every sector, this work is mostly done by the rich people.

 

But one thing can be done, if the money of all the small investors who have less money is collected and a fund is created. Whenever money is collected for a particular purpose, it is called a fund. If everyone together collects a fund and hires a good influencer expert who will tell where to invest and where not to invest, the fee of the expert will also be less because that fee will be divided among everyone and its burden will not fall on anyone. You can invest in a diversified way in less money, but this idea is very good but the biggest challenge in this is that from where will so many people gather and the biggest challenge in that is that whom will you trust.

 

You created a fund of so much money and kept it with someone and he If he runs away then what will happen in that case, so from here the government enters, for this thing a UTI Act has been made in 1963 where the government takes responsibility of all these things, you people may not trust any particular person but you will definitely trust the government and the different organizations made by the government like SBI, PNB Bank General Insurance and so on.

 In 1964 The First Mutual Fund Scheme:- came in India

whose name was US 64, it proved to be the most popular scheme of India, from 1963 to 1987 UTI was the only player of mutual fund in India, then after that government banks came in it, different financial insurances came, PNB Bank of India General Insurance Corporation brought their own mutual funds, but till now only government and companies were coming in it with their mutual funds, but in 1993 SEBI came and as soon as it came, the entry of private companies was also started and due to this the general public got a lot of options. Options opened up, different schemes and offers started coming and competition also started at that time which is going on till date, even though mutual funds were being introduced in India by the government, private companies and international companies. But the government understood the importance of this fund very well, this was the reason that every aspect of mutual funds was regulated by SEBI in a very strict manner. Even today SEBI keeps its involvement in every activity of mutual funds. Every mutual fund has to get the details of its fund, complete expenses, historical data, everything approved from SEBI. Before advertising in the public, let us understand one more thing in this, that if someone wants to start his own mutual fund, then what is the 

complete process to be followed in it. To start a mutual fund, I need five things. 

1. First trust 

2. Second sponsor 

3. Third fund manager 4. Asset Management Company which we call SEBI. People call it AMC

5. Custodian

According to SEBI rules, mutual funds can only be formed as a trust

 Fund Manager:-Fund managers are financial experts 

And have a research team with them whose full time job is to analyze investments and buy investments that meet the goal of the mutual fund. These fund managers are important because they analyze the financial statements of different companies to find out what their income is, what their expenses are, what their profit and loss is. These fund managers also directly talk to the managers and owners of big companies about mutual funds.

 All Mutual Funds Are Not The Same:-Every fund is different. Some are high risk funds, while others are risk-free. Some invest in shares, while others invest in debt. Every fund is clear about how much money it will invest where. It is not that you have bought a mutual fund of the pharma sector. If he has money then he will go and invest it in gold. People think that mutual funds are invested only in the stock market but it is not so. Mutual fund experts invest their money in different places.

 

Now let’s talk about the disadvantages of mutual funds. The fund managers in mutual funds will be able to invest money only when you people invest money. If you people start withdrawing money from the fund, then the fund manager will be forced to withdraw the money from the investment and give it back to you but the fund manager will deduct some percentage.

 

That’s why fund managers do not take much risk, they are happy with the average return.

 

That’s why whenever you people invest in mutual funds, invest for a long time, at least 5 to 7 years, if the goal is big then you can continue for 10 to 15 years also.

 

Conclusion:- In this article, we have talked about mutual funds in detail, so what did you learn by reading this article, please tell us by commenting. Thank you.

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