Mutual funds are a vehicle to mobilize funds from investors with an agreed investment objective and invest in different markets and securities. Mutual funds not only assist investors in earning an income or building their wealth, by participating in the opportunities available in various securities and markets but also provide collected funds towards various large size projects which ultimately helps in growth of business and thus overall economy.
It is possible for mutual funds to structure a scheme for any kind of investment objective. Thus, the mutual fund structure, through its various schemes, makes it possible to tap a large corpus of money from diverse investors. The money that is raised from investors, ultimately benefits governments, companies or other entities, directly or indirectly, to raise moneys to invest in various projects or pay for various expenses. As a large investor, the mutual funds can keep a vigil eye on the operations of the investee company for their corporate governance and ethical standards.
Higher employment, income and output in the economy boost the revenue collection of the government through taxes and other means. When these are spent prudently, it promotes further economic development and nation building. Mutual funds are therefore viewed as a key participant in the capital market of any economy.
Mutual funds seek to mobilize money from investors with different investment objectives. In order to serve their preferences, mutual funds mobilize different pools of money. Each such pool of money is called a mutual fund scheme. Each scheme has a pre-announced investment objective. When investors invest in a mutual fund scheme, they are effectively buying into its investment objective.
