A Mutual Fund, as the name suggests, is a common pool of funds managed by a professional Fund
Manager. It is a trust which collects money from people with common investment goals and invests
them accordingly. The income earned from these investments is then distributed to the investors
proportionately, post deduction of the expenses incurred and the taxes applicable.
A peek into the history of Mutual Funds
In 1963, the Government of India and Reserve Bank of India (RBI) with an objective of turning
India into a developed economy, initiated the creation of a strong financial market with
widespread participation by Indians. This objective led to the birth of the first mutual
fund – Unit Trust of India (UTI). It had a clear vision of encouraging people to
save, invest and participate in the income or profits accruing to a Corporation. This
could be done by acquiring, holding, managing and selling securities.
Over the years, the Mutual Fund industry went through a lot of stages of growth. From the
initial phase of UTI to the entry of public sector mutual funds in 1987 to private
sector joining the club in 1993 to the evolved markets of today. It is virtually
impossible to imagine a diversified investment portfolio without including a few Mutual Fund schemes.
Hence, understanding the functioning of a Mutual Fund is essential for all investors.