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In this present scenario of Slowdown popularly known as recession the most important and highly influential aspect is finance. This aspect of finance has major impact on funding the various sectors for the government also. The FIIs & the FDIs also get attracted by the financial policies of a particular country. Now the major source of investments for these FIIs & FDIs is shares of particular company listed in BSE or NSE, but the major thing that affects investment in shares is HIGH RISK that an investor has to face due to recession as the money flow in the market is very less as the companies are not earning desired results and as a result the foreign investors are bit scared of investing in the country. The major negative impact of this being decrease in the value of shares leading to loss of money to the investors.
All this gave rise to the concept called Mutual funds. The major important benefit of Mutual Funds is Diversification. When an investor invests in a share and if market goes up/Down then the investor will gain/loss in that share only. But in case of Mutual Funds the investor gets the benefit of Diversification i.e. the amount that an investor invests in the Mutual Funds is not invested in single Mutual Fund but the AMC(Assets Management Company) of the Mutual Funds Diversify the Amount in Various Shares and that to Sector wise. Thus even if a particular sector is not performing well the loss suffered in that particular sector is covered by well performing sectors. This Diversification helps to fight the Nightmare of Recession in such a way that the money is though not directly invested by the investors in the share market but it indirectly gets invested through the Mutual Fund Companies. Thus money flow continues to be in the market leading to great impact on the Profits of the companies helping the investors to gain increasing their money inflow which in turns leads to money outflow and again money supply increases in the market. This is known as Cascad
ing Effect.
All this gave rise to the concept called Mutual funds. The major important benefit of Mutual Funds is Diversification. When an investor invests in a share and if market goes up/Down then the investor will gain/loss in that share only. But in case of Mutual Funds the investor gets the benefit of Diversification i.e. the amount that an investor invests in the Mutual Funds is not invested in single Mutual Fund but the AMC(Assets Management Company) of the Mutual Funds Diversify the Amount in Various Shares and that to Sector wise. Thus even if a particular sector is not performing well the loss suffered in that particular sector is covered by well performing sectors. This Diversification helps to fight the Nightmare of Recession in such a way that the money is though not directly invested by the investors in the share market but it indirectly gets invested through the Mutual Fund Companies. Thus money flow continues to be in the market leading to great impact on the Profits of the companies helping the investors to gain increasing their money inflow which in turns leads to money outflow and again money supply increases in the market. This is known as Cascad
ing Effect.