Mutual fund is a vehicle to mobilize money from investors, to invest in different markets and securities, in line with the investment objectives agreed upon, between the mutual fund and the investors. In other words, through investment in a mutual fund, a small investor can avail of professional fund management services offered by an asset management company.
Mutual funds perform different roles for different constituencies.
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.
The money that is raised from investors, ultimately benefits governments, companies or other entities, directly or indirectly, to raise money to invest in various projects or pay for various expenses.
The projects that are facilitated through such financing, offer employment to people.Thus, overall economic development is promoted.
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 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 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.