What is a Mutual Fund?

• Definition: A mutual fund pools money from multiple investors to invest in a diversified portfolio.
• Management: Handled by professional fund managers to balance risk and return.
• Unit-Based Investment: Investors purchase fund units; each unit’s value is called the Net Asset Value (NAV), which changes with market movement.

Classification of Mutual Funds

a. Based on Asset Class:

1. Equity Funds: Invest in stocks; includes large-cap, mid-cap, and small-cap funds.
2. Debt Funds: Invest in bonds and other fixed-income instruments.
3. Hybrid Funds: Mix of equity and debt for balanced risk-return.

b. Based on Investment Objective:

1. Growth Funds: Focus on capital appreciation; suitable for long-term investors.
2. Income Funds: Aim for regular income via bonds/dividends.
3. Liquid Funds: Invest in short-term debt; low risk and high liquidity.
4. Tax-saving Funds (Equity Linked Savings Scheme): Offer Section 80C tax benefits; equity-focused.
5. Pension Funds: Meant for retirement; long-term return-focused.

c. Based on Structure:

1. Open-ended Funds: Investors can enter or exit anytime; highly liquid.
2. Closed-ended Funds: Fixed maturity; investments only during the initial offer period.
3. Interval Funds: Allow purchase/redemption only at specific intervals.

I. India accounts for a very large portion of all equity option contracts traded globally, thus exhibiting a great boom. II. India’s stock market has grown rapidly in the recent past, even overtaking Hong Kong’s at some point in time. III. There is no regulatory body either to warn small investors about the risks of options trading or to act on unregistered financial advisors in this regard.

Which of the statements given above are correct?

Options:  (a) I and II only * (b) II and III only (c) I and III only (d) I, II and III