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During last few years, the bank rates have been dropping and have generally been lower than
the inflation rate. Therefore, it is not an intelligent option to deposit large amounts in banks
as fixed deposits or term deposits. In order to overcome the increasing requirements of dayto-
day routine life and to maintain a decent standard of living one needs to not only save
money, but also invest it in such avenues where one can get maximum returns. But as the
return increases, the risk also increases. Risk and return are the two sides of the same coin and
go hand in hand. It is tough for an investor to earn decent returns matching his risk appetite.
Mutual fund is such an investment avenue which offers different schemes to its investors
that match their risk-bearing capacity and generate smart returns.
Mutual fund is a trust that pools the savings of a number of investors who share a common
financial goal (Sharpe, 1966). It is a thrust area in which a large number of investors put their
money in various schemes called portfolio, to minimize the risk of loss due to investment in
a single stock. The money thus collected is then invested in capital market instruments
which are shares, debentures, bonds, warrants, preference shares and other securities. The
ownership of the fund belongs to all the investors. The income earned through this
investment and the capital appreciation realized is shared by all the investors in proportion
of the units owned by them. The idea behind this is to benefit the investors by allowing them
to contribute a small amount of money into units in various schemes which is then deployed
in capital market.
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