Tuesday, 26 November 2019

Unit 13: Mutual Funds and Insurance Services


                                  Unit 13: Mutual Funds and Insurance Services    

Mutual funds can be described as open-ended funds operated by an investment company which raises money from shareholders and invests in a group of assets, in accordance with a stated set of objectives.

In return for the money they give to the fund when purchasing shares, shareholders receive an equity position in the fund and, in effect, in each of its underlying securities.

For most mutual funds, shareholders are free to sell their shares at any time, although the price of a share in a mutual fund will fluctuate daily, depending upon the performance of the securities held by the fund.

Benefits of mutual funds include diversification and professional money management.

There are many types of mutual funds like Value stocks, Growth stock, Based on company size, large, mid, and small cap, Income stock, Index funds, Enhanced index, Stock market sector, Defensive stock, International, Real estate, Socially responsible, Balanced funds, Tax efficient, Convertible, Junk bond, Mutual funds of mutual funds, Closed end, Exchange traded funds, etc.

Mutual funds have emerged as the best in terms of variety, flexibility, diversification, liquidity as well as tax benefits.

Besides, through MFs investors can gain access to investment opportunities that would otherwise be unavailable to them due to limited knowledge and resources.

MFs have the capability to provide solutions to most investors' needs, however, the key is to do proper selections and have a process for monitoring.

The insurance sector in India has come to a full circle from being an open competitive market to nationalisation and back to a liberalised market again.

Tracing the developments in the Indian insurance sector reveals the 360-degree turn witnessed over a period of almost two centuries.

Indian Financial System      Balanced Funds: The investor may wish to balance his risk between various sectors such as asset size, income or growth.

Therefore the fund is a balance between various attributes desired.

Convertible Bonds: Bonds or Preferred stock which may be converted into common stock.

Defensive Stock: The securities in this fund are chosen from a stock which usually is not impacted by economic down turns.

Insurance: A social device to reduce or eliminate risk of life and property.

Rating: An opinion regarding securities, expressed in the form of standard symbols or in any other standardised manner, assigned by a credit rating agency and used by the issuer of such securities, to comply with a requirement specified by these regulations.

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