Definition: The Mutual Fund is an investment organization that pools the resources of several investors who shares the common financial objectives. These pooled resources are then invested by the fund manager in different securities ranging from shares to debenture to money market instruments based on the objectives as stated in the fund scheme.
Types of Mutual Funds
These can be classified into different categories which are mutually exclusive. These are:
- Functional Classification: This classification is done on the basis of the functions that a fund performs. On the basis of this, these can be further divided into:
- Portfolio Classification: This classification is done on the basis of the type of securities in which the investments are made. These can be divided into:
- Ownership Classification: This classification is done on the basis of the type of company that sponsors the mutual funds. These can be divided into:
- Public Sector Mutual Funds: These funds are sponsored by the companies of the public sector. Such as, SBI Mutual Fund, LIC Mutual Fund, Canbank Mutual Fund, etc.
- Private Sector Mutual Funds: These funds are sponsored by the companies of the private sector. Some of the well known private mutual funds are ICICI Mutual Fund, HDFC Mutual Fund, DSP Merrill Lynch Mutual Fund, Reliance Mutual Fund, etc.
- Foreign Mutual Funds: These funds are sponsored by those companies that raise funds in India, which operates in India as well as invest in India. Such as Kotak US Equity Fund, JP Morgan Europe Dynamic Equity, Franklin Asian Equity, etc.
Thus, the investor can invest in either of the funds depending on the nature of the investment and the benefits offered by each.