What is the History of Mutual Funds?

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  • 22 Dec 2023
What is the History of Mutual Funds?

1. Early Beginnings

The roots of mutual funds in India can be traced back to 1963, when the Unit Trust of India (UTI) was established. As the country’s first mutual fund, UTI aimed to make the benefits of capital market investments available to the commoner. It was a bold step toward financial inclusion and paved the way for the growth of the mutual fund industry in India.

2. Subsequent Years of Evolution and Growth

The late 1980s and 1990s saw a significant expansion in the mutual fund landscape, with public and private sector players entering the arena. SBI Mutual Fund entered the scene in 1987. It holds the distinction of being the first non-UTI mutual fund in the history of mutual funds in India.

During this period, UTI and other mutual funds introduced various schemes catering to diverse investor needs. Investors could choose from equity, debt, and hybrid funds, among others, providing them with a spectrum of investment options.

3. Regulatory Framework

As the popularity of mutual funds soared, the need for a robust regulatory framework became apparent. In 1993, the Securities and Exchange Board of India (SEBI) was entrusted with regulating and overseeing mutual funds. SEBI’s involvement brought about transparency, accountability, and investor protection, creating a conducive environment for the industry to flourish.

The advent of technology in the 21st century revolutionized the way mutual funds operated. Online platforms and mobile applications made it easier for investors to manage their portfolios and transact seamlessly. This technological leap democratized mutual fund investments, enabling even small investors to participate in the market.

4. SIP Revolution

Introducing Systematic Investment Plans (SIPs) in 1993 brought a revolutionary change to the mutual fund landscape. SIPs allowed investors to contribute small amounts regularly, fostering a disciplined approach to investing.

This approach appealed to a broader investor base, leading to a surge in mutual fund participation across various demographic segments. As per AMFI, Indian mutual funds have nearly 7.3 crore SIP accounts through which investors invest in mutual fund schemes.

In Conclusion

The Indian mutual fund industry has seen remarkable growth over the years, with assets under management (AUM) reaching new highs. However, challenges such as market volatility, regulatory changes, and economic uncertainties have also been part of the journey. The industry’s resilience and adaptability have been crucial in navigating these challenges and sustaining its growth trajectory.

FAQs on What is the History of Mutual Funds

MFS’ Massachusetts Investors Trust (MITTX), founded in 1924, is the oldest mutual fund in the world.

The Vanguard Group is the world's largest mutual fund company, with an AUM of 6.1 trillion US dollars as of September 2023.

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