MUTUAL FUND [PART 1]: UPSC Daily Important Topic | 3 December 2021

MUTUAL FUND [PART 1]

• Of all investment options, mutual funds are touted to be the best tool for wealth creation over the long term.

• They are of several types, and the risk varies with the kind of asset classes these funds invest in.

• As the name suggests, a mutual fund is a fund that is created when a large number of investors put in their money and is managed by professionally qualified persons with experience in investing in different asset classes—shares, bonds, money market instruments like call money, and other assets such as gold and property.

Their names usually give a good idea about what type of asset class a fund, also called a scheme, will invest in.

For example, a diversified equity fund will invest in a large number of stocks, while a gilt fund will invest in government securities, while a pharma fund will mainly invest in stocks of companies from the pharmaceutical and related industries.