Companies, Investment Banks / Hedge Funds, Mutual Funds / ETFs or Insurance Companies.) The project deliverable will be a professionally constructed paper (with full research citations) You will...

1
Financial Instruments
Contents
Mutual funds:    3
Meaning:    3
Role in the economy:    4
Historical evolution:    5
Exchange traded funds:    5
Meaning:    5
Role in the economy:    6
Historical evolution:    7
References:    8
Mutual funds:
Meaning:
Mutual funds can be described as a fund in which money is collected by a pool of people or we can also say investors. In this fund the investors who invest their money have same investment objective. These mutual funds are managed and controlled by a fund manager who has adequate professional knowledge which is required for the purpose of investing the money of investors in proper shares that could yield maximum benefits. Once the funds are collected, and then these funds are invested in various shares, equity instruments, bonds, money market and capital market instruments and many other securities. The investors are allotted units of the mutual funds in proportion to their investment. The income or the profit which is earned from the investments done in the securities is distributed in a proportionate manner among the investors on the basis of net asset value ("What Is Mutual Fund? Definition, How It Works" 2021). It can be said that mutual fund is an indirect investment done by investors as they do not directly invest in securities in the exchange market. There are certain features of mutual funds that describe mutual funds in the best manner these are:
· Generally setup as a trust
· It is heavily regulated.
· Transparency is provided to the investors
· Simple long only strategies are used
· Diversified portfolio as the funds is invested in various securities.
· Both active and passive strategies are used
· Fees or salary which is charged from the fund manager is fixed and it is not dependent on his performance.
· Limited use of leverage
· High liquidity
· Primarily suitable for small investors.
There are two types of mutual funds:
1. Open ended:
Features:
· These are not traded on any exchange
· Fund itself provides the liquidity
· Unit capital is not fixed
· Price= NAV but its subject to the load feature
· NAV is once a day affair; therefore open ended mutual funds cannot be traded like shares.
· Both active and passive strategies are used.
2. Closed ended:
Features:
· These are traded on one or more exchanges.
· Liquidity depends on the stock exchange.
· Unit capital is fixed
· Price may be at a significant discount or premium to the NAV; therefore it’s painful for the investors who want to sell the funds.
· Since these are listed on the stock exchange, so trading like shares is possible.
· Usually active strategies are used.
Role in the economy:
A. Financial sector development: Improvement of monetary area upgrades the four mainstays of the monetary framework: productivity, dependability, straightforwardness, and incorporation. Common asset putting assumes a significant part in this turn of events. They pool the assets from the little financial backers together, accordingly expanding support in the monetary business sectors. Then, shared assets offer types...