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A financial intermediary or intermediator is a financial institution.
It may be a bank, building society, insurance company, investment bank or pension fund.
A financial intermediary offers a service to help an individual or firm to save or borrow money.
A financial intermediary helps to satisfy different needs of lenders and borrowers.
Role and function of financial institutions in financial market
The main functions of the financial institutions are as follows:
a. |
Financial institutions accumulate the savings from several small investors and invest the same in the security. |
b. |
They offer margin lending opportunity to the prospective customers to purchase new securities from the market. |
c. |
They bring funds suppliers and fund borrowers together in single platform. |
d. |
They play vital role in transferring fund from one entity to another entity through financial market. |
e. |
Non-depository financial institutions like mutual funds play important role in financial intermediary. |
f. |
They allocating saving into investment. |
g. |
Providing financial services. |
h. |
Ensuring satisfaction, return and minimizing the risk of loss. |
i. |
Helping cost of living raising funds. |
Financial Intermediaries
Depository institutions |
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Non-depository institutions |
Commercial banks |
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Insurance companies |
Development banks |
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Pension fund |
Finance companies |
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Mutual fund |
Saving and loan cooperatives |
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Accounting Equation |
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Basic Journal Entries in Nepali |
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Basic Journal Entries |
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Journal Entry and Ledger |
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Ledger |
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Subsidiary Book |
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Cash Book |
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Trial Balance & Adjusted Trial Balance |
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Bank Reconciliation Statement (BRS) |
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Depreciation |
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Final Account: Class 11 |
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Adjustment In Final Account |
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Capital and Revenue |
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Single Entry System |
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Non-Profit Organization (Non-Trading Concern) |
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Government Accounting |
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Goswara Voucher (Journal Voucher) |
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Mutual fund is a professionally-managed trust.
It is a pool of the savings of many investors.
Mutual fund is invested in securities like shares, corporate bonds, government bonds and short-term money market instruments.
It is also invested in commodities such as precious metals.
Investors in a mutual fund have a common financial goal and their money is invested in different asset.
Investments in mutual funds involve comparatively small amounts.
It may be even few thousand rupees.
Mutual funds are operated by mutual fund companies.
Generally, mutual funds are well diversified investment of portfolio.
It reduces the risk and maximizes the profit.
Mutual funds investment is managed by professional fund managers or industry.
They offer an attractive way for savings to be managed without paying high fees.
Mutual funds present an option for investors who lack the time or knowledge to make traditional and complex investment decisions.
Net asset value (NAV) is the total asset value (net of expenses) per unit of the fund and is calculated by the asset management company at the end of every business day.
To calculate the NAV of a mutual fund, you need to take the current market value of the security minus the liabilities.
NAV is calculated as follows:
Net asset value (NAV) = Net market value of security ÷ No. of outstanding units of the scheme
Net market value = Market value of security + Accrued income + Receivable + Other assets − Accrued expenses − Payable − Other liabilities
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Currency of your country
Example:
Market value of securities of a mutual fund scheme is $/₹/Rs 5,00,00,000
Mutual Fund has issued 10,00,000 units
Net asset value (NAV)
= Net market value of security ÷ No. of outstanding units of the scheme
= Rs 5,00,00,000 ÷ 10,00,000 units
= Rs 50 per unit
Mutual funds are a kind of shared investment.
When investor buys shares in a mutual fund, he/she becomes the owner of a group of securities or other assets in a pool with other investors.
A mutual fund manager manages the fund, selecting the specific assets that will populate the fund and charges investors a fee to participate.
Keep in Mind
List of Mutual Funds in Nepal: |
Citizens Mutual Fund-1 (CMF1) |
Global IME Samunnat Scheme-1 (GIMES1) |
Nabil Balanced Fund-2 (NBF2) |
NIBL Sambriddhi Fund-1 (NIBSF1) |
Citizens Mutual Fund-2 (CMF2) |
Nabil Equity Fund (NEF) |
NMB 50 Fund (NMB50) |
NMB Hybrid Fund L-1 (NMBHF1) |
Siddhartha Investment Growth Scheme – 2 (SIGS2) |
NIBL Pragati Fund (NIBLPF) |
NIC Asia Balance Fund (NICBF) |
Laxmi Equity Fund (LEMF) |
Sunrise First Mutual Fund (SFMF) |
Siddhartha Equity Fund (SEF) |
NIBL Sahabhagita Fund (NIBLSF) |
Sanima Equity Fund (SAEF) |
[the only open-end mutual fund scheme of Nepal] |
NIC Asia Growth Fund (NICGF) |
Laxmi Unnati Kosh (LUK) – initial issue from 26 July 2020 |
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Share (Accounting for Share) |
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Share in Nepali |
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Debentures |
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Final Account: Class 12 |
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Final Account in Nepali |
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Work Sheet |
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Ratio Analysis (Accounting Ratio) |
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Fund Flow Statement |
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Cash Flow Statement |
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Theory Accounting Xii |
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Theory: Cost Accounting |
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Cost Accounting |
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LIFO−FIFO |
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Cost Sheet, Unit Costing |
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Cost Reconciliation Statement |
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The main functions of mutual fund are given below:
Mutual funds serve as a way to make a diversified investment.
Although a mutual fund typically focuses on a specific asset type, such as bonds or stocks.
It allows for diversification within that asset type.
For instance, a stock fund could contain dozens of different stocks.
This allows investors to invest their money in a number of different assets at once, making multiple investments with one purchase.
Diversification is designed to use the gains of some assets to protect against losses in some others.
Mutual funds vary in the types of assets that they hold.
This allows individual investors to purchase shares in funds that meet their particular needs and preferences.
Mutual funds exist for securities such as shares and bonds.
They are available for money-market instruments. Such as certificates of deposit and treasury bills.
A mutual fund serves to provide investors with professional management of their investment.
For an amateur investor, it is a difficult task to manage a diversified portfolio.
The fund manager tackles that job with a mutual fund for all of the funds’ shareholders.
In addition, a mutual fund simplifies the trading process for investors.
Mutual funds exist to meet a wide range of investors’ goals.
Some mutual funds target steady, long-term growth, while others focus on more short-term goals.
For instance, an investor seeking a conservative, low-risk investment with long-term returns could invest in an index/market fund.
More ambitious stock funds seek to produce returns better than the market averages.
Keep in Mind (KIM)
Type of mutual fund: |
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Based on the maturity period: |
Based on investment objectives: |
Other Schemes: |
Open-ended Funds |
Equity/Growth Funds |
Tax-Saving Funds |
Close-ended Funds |
Debt/Income Funds |
Index Funds |
Interval Funds |
Balanced Funds |
Sector-specific Funds |
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Money Market/Liquid Funds |
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Gift Funds |
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Keep in Mind
Mutual funds in India |
The mutual fund industry was begun in India in 1963. |
The first mutual fund in India was Unit Trust of India (UTI). |
It was as an initiative of the Government of India and the Reserve Bank of India. |
Much later SBI Mutual Fund launched in in 1987; it became the first non-UTI mutual fund in India. |
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Here is the list of top 10 schemes (in October 2020) |
ICICI Prudential Equity & Debt Fund |
Mirae Asset Hybrid Equity Fund |
Axis Bluechip Fund |
ICICI Prudential Bluechip Fund |
L&T Midcap Fund |
DSP Midcap Fund |
L&T Emerging Businesses Fund |
HDFC Small Cap Fund |
Motilal Oswal Multicap 35 Fund |
Kotak Standard Multicap Fund |
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