What are the Role of Mutual Funds?
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Role of Mutual Funds:
There are the different role of mutual funds, It performs different roles for the different constituents that participate in it. Their primary role is to assist investors in earning an income or building their wealth, by participating in the opportunities available in various securities and markets.
Mutual funds can structure a scheme for different kinds of investment objectives. Thus, the mutual fund structure through its various schemes makes it possible to tap a large corpus of money from investors with diverse goals & objectives.
Offer Different Kinds of Schemes
Therefore, Mutual funds offer different kinds of schemes to cater to the need of diverse investors. In this industry, the words ‘fund’ and ‘scheme’ are used interchangeably. Various categories of schemes are called “funds”.
The money that is raised from investors, ultimately benefits governments, companies and other entities, directly or indirectly, to raise money for investing in various projects or paying for various expenses.
The projects that are facilitated through such financing, offer employment to people; the income they earn helps the employees to buy goods and services offered by other companies, thus supporting projects of these goods and services companies. Thus, overall economic development is promoted.
Benefits as a Large Investor
As a large investor, the mutual funds can keep a check on the operations of the investee company, and their corporate governance and ethical standards.
The mutual fund industry itself offers livelihood to a large number of employees of mutual funds, distributors, registrars, and various other service providers
Higher employment, income, and output in the economy boosts 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 can also act as a market stabilizer, in countering large inflows or outflows from foreign investors. Mutual funds are therefore viewed as a key participant in the capital market of any economy.
Hi, I’m Managing Director at Gurpreet Saluja Financial Services where I help my investors to invest in mutual funds and achieve their financial goals. I’m also a Value Investor and here I write about Personal Finance & Investing.
