What Is a Mutual Fund?

A mutual fund is a type of financial vehicle made up of a pool of money collected from many investors to invest in securities like stocks, bonds, money market instruments, and other assets. Mutual funds are operated by professional money managers, who allocate the fund's assets and attempt to produce capital gains or income for the fund's investors. A mutual fund's portfolio is structured and maintained to match the investment objectives stated in its prospectus.

Mutual funds give small or individual investors access to professionally managed portfolios of equities, bonds, and other securities. Each shareholder, therefore, participates proportionally in the gains or losses of the fund. Mutual funds invest in a vast number of securities, and performance is usually tracked as the change in the total market cap of the fund—derived by the aggregating performance of the underlying investments.

KEY TAKEAWAYS

• A mutual fund is a type of investment vehicle consisting of a portfolio of stocks, bonds, or other securities.
• Mutual funds give small or individual investors access to diversified, professionally managed portfolios at a low price.
• Mutual funds are divided into several kinds of categories, representing the kinds of securities they invest in, their investment objectives, and the type of returns they seek.
• Mutual funds charge annual fees (called expense ratios) and, in some cases, commissions, which can affect their overall returns.
• The overwhelming majority of money in employer-sponsored retirement plans goes into mutual funds.

SHARES

In financial markets, a share is a unit used as mutual funds, limited partnerships, and real estate investment trusts. The owner of shares in the company is a shareholder (or stockholder) of the corporation. A share is an indivisible unit of capital, expressing the ownership relationship between the company and the shareholder. The denominated value of a share is its face value, and the total of the face value of issued shares represent the capital of a company, which may not reflect the market value of those shares.

The income received from the ownership of shares is a dividend. The process of purchasing and selling shares often involves going through a stockbroker as a middle man. There are different types of shares such as equity shares, preference shares, bonus shares, right shares, and employees stock option plan shares.

Debenture      

A debenture is one of the most typical forms of long term loans that a company can take.
It is normally a loan that should be repaid on a specific date, but some debentures are irredeemable securities (sometimes referred to as perpetual debentures).
The majority of debentures come with a fixed interest rate. This interest must be paid before dividends are paid to shareholders. In the US, most debentures are unsecured, but elsewhere debentures are typically secured through the borrower’s assets.

Debenture holders

Debenture holders (investors) are not allowed to vote in the company's general shareholders meetings, but they may have separate meetings or votes, for instance regarding changes to the rights associated with the debentures.
The interest that is paid to debenture holders is calculated as a charge against profit in the company's financial statements.

Types of debentures

Debentures come in two types:
Convertible debentures: Convertible bonds or bonds that can be converted into equity shares of the issuing company after a predetermined period of time. To investors, convertible bonds are more attractive because the bonds can be converted, and to companies they have the advantage that they normally have      lower interest rates than non-convertible corporate bonds.
Non-convertible debentures: Standard debentures that can't be converted into equity shares of the liable company. Since they can't be converted, they usually have higher interest rates than convertible debentures.

Benefits

Debentures are mainly beneficial to companies by having a lower interest rate than other types of loans, e.g. overdrafts. Further, they normally only need to be repaid by a very remote date.
The main benefits of debentures to investors is that they can usually be sold in stock exchanges quite easily and they come with less risk than e.g. equities.

National  saving certificate ( Rastriya Bachat Patra)