Mutual Funds Definition refers to the meaning of Mutual Fund, which is a fund, m

anaged by an investment company with the financial objective of generating high

Rate of Returns. These asset management or investment management companies colle
cts money from the investors and invests those money in different Stocks, Bonds
and other financial securities in a diversified manner. Before investing they ca
rry out thorough research and detailed analysis on the market conditions and mar
ket trends of stock and bond prices. These things help the fund mangers to specu
late properly in the right direction.

The investors who invest their money in the Mutual fund of any Investment Manage
ment Company, receive an Equity Position in that particular mutual fund. When af
ter certain period of time, whether long term or short term, the investors sell
the Shares of the Mutual Fund, they receive the return according to the market c
onditions.
The investment companies receive profit by allocating people's money in differen
t stocks and bonds according to their Speculation about the Market Trend.
Other than some specific mutual funds which carry certain Maturity Term, Investo
rs can generally sell the shares of their mutual funds at any time they want. Bu
t, the return will vary according to market value of the stocks and bonds in whi
ch that particular mutual fund made investment. But, generally the share holders
of mutual fund sell their share when the prices are up and Capital Gain is sure
to happenâ ¦..
Scope of Mutual Funds
Scope of Mutual Funds has grown enormously over the years. In the first age of m
utual funds,when the investment management companies started to offer mutual fun
ds, choices were few. Even though people invested their money in mutual funds as
these funds offered them diversified investment option for the first time. By i
nvesting in these funds they were able to diversify their investment in common s
tocks, preferred stocks, bonds and other financial securities. At the same time
they also enjoyed the advantage of liquidity. With Mutual Funds, they got the sc
ope of easy access to their invested funds on requirement.
But, in todays world, Scope of Mutual Funds has become so wide, that people some
times take long time to decide the mutual fund type, they are going to invest in
. Several Investment Management Companies have emerged over the years who offer
various types of Mutual Funds, each type carrying unique characteristics and dif
ferent beneficial features.
To understand the broad scope of Mutual Funds we need to discuss the main types
of Mutual Funds that are normally offered by the Mutual Companies.
The wide choices in Mutual Funds go as the following:

Equity Funds or Stock Funds These types of Mutual Funds generally invest in stoc
ks which are publicly traded. Amount of risk, involved with these funds vary acc
ording to different types of Equity Funds.
Types of Equity Funds are;
1. Growth Funds-These funds invest in the stocks, which are under valued co
mpared to their worth. As these stock prices tends to rise in future and carry g
ood growth potential, Growth Funds go for these kind of stocks.
2. Value Funds-These funds go for long term investment and aims at increase
of value over the years.
3. International Equity Funds-These funds invest in the stocks of foreign c
ompanies.
4. Global Equity Funds-These funds invest in stocks of both the domestic ma
rket and the foreign markets.
5. Sector Funds or Specialty Funds-These funds invest in specific sectors l
ike Health care and in specific commodities like Gold.
6. Index Funds-These funds reflect the performance of stock market indexes.

Bond Funds These funds invest in government bonds and corporate bonds. These Bon
d Funds offer a steady source of income and in many times these incomes get the
advantage of Tax Exemption.
Money Market Funds These funds invest in the money market. These funds involve l
ow level of risk and promises comparatively low rate of return.
Balanced Fund These funds invest both in Stocks and Bonds and thus offer a well
diversified investment portfolio.
History of Mutual Funds

History of Mutual Funds has evolved over the years and it is sure to appear as s
omething very interesting for all the investors of the world. In present world,
mutual funds have become a main form of investment because of its diversified an
d liquid features. Not only in the developed world, but in the developing countr
ies also different types of mutual funds are gaining popularity very fast in a t
remendous way. But, there was a time when the concept of Mutual Funds were not p
resent in the economy.
There is an ambiguity about the fact that when and where the Mutual Fund Concept
was introduced for the first time. According to some historians, the mutual fun
ds were first introduced in Netherlands in 1822. But according to some other bel
ief, the idea of Mutual Fund first came from a Dutch Merchant ling back in 1774.
In 1822, that idea was further developed. In 1822, the concept of Investment Di
versification was properly incorporated in the mutual funds. In fact, the Invest
ment Diversification is the main attraction of mutual funds as the small investo
rs are also able to allocate their little Funds in a diversified way to lower Ri
sks.
After 1822 in Netherlands, the Mutual Funds Concept came in Switzerland in 1849
and thereafter in Scotland in the 1880s. After being popular in Great Britain an
d France, Mutual fund concept traveled to U.S.A in the 1890s. In 1920s and 1930s
, the Mutual Fund popularity reached a new high. There was record investment don
e in mutual funds. But, before 1920s,the mutual funds were not like the modern d
ay mutual funds.
The modern day mutual funds came into existence in 1924, in Boston. Massachusett
s Investors Trust introduced the Modern Mutual Funds and the funds were availabl
e from 1928. At present this Massachusetts Investors Trust is known as MFS Inves
tment Management Company. After the glorious year of 1928, Mutual fund ideas exp
anded to different levels and different regulations came for well functioning of
the funds.
Still today, the funds are evolving and improving in order to offer people much
wider choices and better advantages for fulfillment of their various investment
needs and financial objectives.
Average Annual Return
Average Annual Return refers to the return of a mutual fund which is measured as
 an average after deducting the mutual fund's operating Expense Ratio. These exp
enses do not contain the Sales Charges of the mutual fund. In many cases of Mutu
al Fund Investment, the investors are required to pay Transaction Brokerage Comm
issions for their Investment Portfolio. But, these commissions are not counted f
or at the time calculating the Average Annual Return.
This Average Annual Return is actually a figure which is represented in percenta
ge and is used to reveal a particular mutual fund's historical return. Generally
, Average Annual Return of a mutual fund shows the average returns of the fund o
ver last three years or five years or ten years. A fund can also calculate the A
verage Annual Return on the basis of its returns for the whole life of the fund.
It is a clear fact that Average Annual Return is not a compounded rate of return
. Annual Returns of a fixed number of years is added and divided by the number o
f years, to get the figure of Average Annual Return and when the returns are con
sidered, the Expense Ratios are subtracted to get the net value of returns.
This Average Annual Return calculation is necessary to get a clear idea about th
e Reinvested Dividend. Capital Gain Distribution is also related with Average An
nual Return.
The figure of Average Annual Return, is not only important for the mutual Fund M
anagers and the investment company but also for the individual and institutional
investors. The investors can get an idea about the performance of a particular
mutual fund in the long term, by studying the Average Annual Return figures of t
he mutual fund over different periods. It can be mentioned here that though the
Average Annual Return figure is really important, the investors should also chec
k out the annual returns of the mutual fund that they are considering to invest
in. This is because, an impressive Average Annual Return does not necessarily im
ply consistency of good annual returns.
MUTUAL FUND COMPANIES ININDIA
The concept of mutual funds in India dates back to the year 1963. The era betwee
n 1963 and 1987 marked the existance of only one mutual fund company in India wi
th Rs. 67bn assets under management (AUM), by the end of its monopoly era, the U
nit Trust of India (UTI). By the end of the 80s decade, few other mutual fund co
mpanies in India took their position in mutual fund market.
The new entries of mutual fund companies in India were SBI Mutual Fund, Canbank
Mutual Fund, Punjab National Bank Mutual Fund, Indian Bank Mutual Fund, Bank of
India Mutual Fund.
The succeeding decade showed a new horizon in indian mutual fund industry. By th
e end of 1993, the total AUM of the industry was Rs. 470.04 bn. The private sect
or funds started penetrating the fund families. In the same year the first Mutua
l Fund Regulations came into existance with re-registering all mutual funds exce
pt UTI. The regulations were further given a revised shape in 1996.
Kothari Pioneer was the first private sector mutual fund company in India which
has now merged with Franklin Templeton. Just after ten years with private sector
players penetration, the total assets rose up to Rs. 1218.05 bn. Today there ar
e 33 mutual fund companies in India.
Major Mutual Fund Companies in India
ABN AMRO Mutual Fund
ABN AMRO Mutual Fund was setup on April 15, 2004 with ABN AMRO Trustee (India) P
vt. Ltd. as the Trustee Company. The AMC, ABN AMRO Asset Management (India) Ltd.
 was incorporated on November 4, 2003. Deutsche Bank A G is the custodian of ABN
AMRO Mutual Fund.
Birla Sun Life Mutual Fund
Birla Sun Life Mutual Fund is the joint venture of Aditya Birla Group and Sun Li
fe Financial. Sun Life Financial is a golbal organisation evolved in 1871 and is
being represented in Canada, the US, the Philippines, Japan, Indonesia and Berm
uda apart from India. Birla Sun Life Mutual Fund follows a conservative long-ter
m approach to investment. Recently it crossed AUM of Rs. 10,000 crores.
Bank of Baroda Mutual Fund (BOB Mutual Fund)
Bank of Baroda Mutual Fund or BOB Mutual Fund was setup on October 30, 1992 unde
r the sponsorship of Bank of Baroda. BOB Asset Management Company Limited is the
AMC of BOB Mutual Fund and was incorporated on November 5, 1992. Deutsche Bank
AG is the custodian.
HDFC Mutual Fund
HDFC Mutual Fund was setup on June 30, 2000 with two sponsorers nemely Housing D
evelopment Finance Corporation Limited and Standard Life Investments Limited.
HSBC Mutual Fund
HSBC Mutual Fund was setup on May 27, 2002 with HSBC Securities and Capital Mark
ets (India) Private Limited as the sponsor. Board of Trustees, HSBC Mutual Fund
acts as the Trustee Company of HSBC Mutual Fund.
ING Vysya Mutual Fund
ING Vysya Mutual Fund was setup on February 11, 1999 with the same named Trustee
Company. It is a joint venture of Vysya and ING. The AMC, ING Investment Manage
ment (India) Pvt. Ltd. was incorporated on April 6, 1998.
Prudential ICICI Mutual Fund
The mutual fund of ICICI is a joint venture with Prudential Plc. of America, one
of the largest life insurance companies in the US of A. Prudential ICICI Mutual
Fund was setup on 13th of October, 1993 with two sponsorers, Prudential Plc. an
d ICICI Ltd. The Trustee Company formed is Prudential ICICI Trust Ltd. and the A
MC is Prudential ICICI Asset Management Company Limited incorporated on 22nd of
June, 1993.
Sahara Mutual Fund
Sahara Mutual Fund was set up on July 18, 1996 with Sahara India Financial Corpo
ration Ltd. as the sponsor. Sahara Asset Management Company Private Limited inco
rporated on August 31, 1995 works as the AMC of Sahara Mutual Fund. The paid-up
capital of the AMC stands at Rs 25.8 crore.
State Bank of India Mutual Fund
State Bank of India Mutual Fund is the first Bank sponsored Mutual Fund to launc
h offshor fund, the India Magnum Fund with a corpus of Rs. 225 cr. approximately
. Today it is the largest Bank sponsored Mutual Fund in India. They have already
launched 35 Schemes out of which 15 have already yielded handsome returns to in
vestors. State Bank of India Mutual Fund has more than Rs. 5,500 Crores as AUM.
Now it has an investor base of over 8 Lakhs spread over 18 schemes.
Tata Mutual Fund
Tata Mutual Fund (TMF) is a Trust under the Indian Trust Act, 1882. The sponsore
rs for Tata Mutual Fund are Tata Sons Ltd., and Tata Investment Corporation Ltd.
The investment manager is Tata Asset Management Limited and its Tata Trustee Co
mpany Pvt. Limited. Tata Asset Management Limited's is one of the fastest in the
country with more than Rs. 7,703 crores (as on April 30, 2005) of AUM.
Kotak Mahindra Mutual Fund
Kotak Mahindra Asset Management Company (KMAMC) is a subsidiary of KMBL. It is p
resently having more than 1,99,818 investors in its various schemes. KMAMC start
ed its operations in December 1998. Kotak Mahindra Mutual Fund offers schemes ca
tering to investors with varying risk - return profiles. It was the first compan
y to launch dedicated gilt scheme investing only in government securities.
Unit Trust of India Mutual Fund
UTI Asset Management Company Private Limited, established in Jan 14, 2003, manag
es the UTI Mutual Fund with the support of UTI Trustee Company Privete Limited.
UTI Asset Management Company presently manages a corpus of over Rs.20000 Crore.
The sponsorers of UTI Mutual Fund are Bank of Baroda (BOB), Punjab National Bank
(PNB), State Bank of India (SBI), and Life Insurance Corporation of India (LIC)
. The schemes of UTI Mutual Fund are Liquid Funds, Income Funds, Asset Managemen
t Funds, Index Funds, Equity Funds and Balance Funds.
Reliance Mutual Fund
Reliance Mutual Fund (RMF) was established as trust under Indian Trusts Act, 188
2. The sponsor of RMF is Reliance Capital Limited and Reliance Capital Trustee C
o. Limited is the Trustee. It was registered on June 30, 1995 as Reliance Capita
l Mutual Fund which was changed on March 11, 2004. Reliance Mutual Fund was form
ed for launching of various schemes under which units are issued to the Public w
ith a view to contribute to the capital market and to provide investors the oppo
rtunities to make investments in diversified securities.
Standard Chartered Mutual Fund
Standard Chartered Mutual Fund was set up on March 13, 2000 sponsored by Standar
d Chartered Bank. The Trustee is Standard Chartered Trustee Company Pvt. Ltd. St
andard Chartered Asset Management Company Pvt. Ltd. is the AMC which was incorpo
rated with SEBI on December 20,1999.
Franklin Templeton India Mutual Fund
The group, Frnaklin Templeton Investments is a California (USA) based company wi
th a global AUM of US$ 409.2 bn. (as of April 30, 2005). It is one of the larges
t financial services groups in the world. Investors can buy or sell the Mutual F
und through their financial advisor or through mail or through their website. Th
ey have Open end Diversified Equity schemes, Open end Sector Equity schemes, Ope
n end Hybrid schemes, Open end Tax Saving schemes, Open end Income and Liquid sc
hemes, Closed end Income schemes and Open end Fund of Funds schemes to offer.
Morgan Stanley Mutual Fund India
Morgan Stanley is a worldwide financial services company and its leading in the
market in securities, investmenty management and credit services. Morgan Stanley
Investment Management (MISM) was established in the year 1975. It provides cust
omized asset management services and products to governments, corporations, pens
ion funds and non-profit organisations. Its services are also extended to high n
et worth individuals and retail investors. In India it is known as Morgan Stanle
y Investment Management Private Limited (MSIM India) and its AMC is Morgan Stanl
ey Mutual Fund (MSMF). This is the first close end diversified equity scheme ser
ving the needs of Indian retail investors focussing on a long-term capital appre
ciation.
Escorts Mutual Fund
Escorts Mutual Fund was setup on April 15, 1996 with Excorts Finance Limited as
its sponsor. The Trustee Company is Escorts Investment Trust Limited. Its AMC wa
s incorporated on December 1, 1995 with the name Escorts Asset Management Limite
d.
Alliance Capital Mutual Fund
Alliance Capital Mutual Fund was setup on December 30, 1994 with Alliance Capita
l Management Corp. of Delaware (USA) as sponsorer. The Trustee is ACAM Trust Com
pany Pvt. Ltd. and AMC, the Alliance Capital Asset Management India (Pvt) Ltd. w
ith the corporate office in Mumbai.
Benchmark Mutual Fund
Benchmark Mutual Fund was setup on June 12, 2001 with Niche Financial Services P
vt. Ltd. as the sponsorer and Benchmark Trustee Company Pvt. Ltd. as the Trustee
Company. Incorporated on October 16, 2000 and headquartered in Mumbai, Benchmar
k Asset Management Company Pvt. Ltd. is the AMC.
Canbank Mutual Fund
Canbank Mutual Fund was setup on December 19, 1987 with Canara Bank acting as th
e sponsor. Canbank Investment Management Services Ltd. incorporated on March 2,
1993 is the AMC. The Corporate Office of the AMC is in Mumbai.
Chola Mutual Fund
Chola Mutual Fund under the sponsorship of Cholamandalam Investment & Finance Co
mpany Ltd. was setup on January 3, 1997. Cholamandalam Trustee Co. Ltd. is the T
rustee Company and AMC is Cholamandalam AMC Limited.
LIC Mutual Fund
Life Insurance Corporation of India set up LIC Mutual Fund on 19th June 1989. It
contributed Rs. 2 Crores towards the corpus of the Fund. LIC Mutual Fund was co
nstituted as a Trust in accordance with the provisions of the Indian Trust Act,
1882. . The Company started its business on 29th April 1994. The Trustees of LIC
Mutual Fund have appointed Jeevan Bima Sahayog Asset Management Company Ltd as
the Investment Managers for LIC Mutual Fund.
GIC Mutual Fund
GIC Mutual Fund, sponsored by General Insurance Corporation of India (GIC), a Go
vernment of India undertaking and the four Public Sector General Insurance Compa
nies, viz. National Insurance Co. Ltd (NIC), The New India Assurance Co. Ltd. (N
IA), The Oriental Insurance Co. Ltd (OIC) and United India Insurance Co. Ltd. (U
II) and is constituted as a Trust in accordance with the provisions of the India
n Trusts Act, 1882.