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explain the basic structure of banks, insurance companies, mutual funds, and pension

explain the basic structure of banks, insurance companies, mutual funds, and pension

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The basic structure of banks, insurance companies, mutual funds, and pension is to help finance transactions or insure against the risks associated with the buying and selling of goods and services. They work like financial intermediaries between savers and borrowers of money. These financial institutions create a pool of fund by collecting the money from many small investors (savers) by paying them interest or sharing profit and then divert that capital to companies or individuals in form of loan (borrowers).

The individuals provide funds to financial institutions in the form of bank deposits to the commercial banks, investment in mutual funds, purchases of insurance policies or investment in pensions. The financial institutions use to invest that fund in various investment options available to them and they can purchase of debt securities issued by large corporations by using the fund deposited/invested by individual investors or investing directly in equity markets.

jeff jeffy answered 2 years ago
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