What is mutual fund?
A mutual fund is a common pool of funds invested by different investors. The fund manger then invests the collected money into specific securities like bonds, shares or other money market instruments. The returns earn through these investments are shared by its investors in ratio to the number of units owned by them.
Advantages of Mutual fund:
The main advantage of mutual funds is that it is professionally managed by fund managers and advisory of the fund. The small contribution of the investors is invested in the various schemes, which in turn are deployed into various markets. Thus investors who are not in a position to directly invest in the markets can take advantage of this path.
We all are busy in our own schedule and for the same we don???t have the time, knowledge and skills to keep track of the financial market and analyze where and whether he/she should invest or not. Also someone may find it difficult to keep a record of his investment and other assets. You can say, A mutual fund solves his/her problem wherein professionally qualified individuals manage all the above mentioned functions regularly.
In a equity mutual fund investments are made in the stocks of various companies in various sectors, it is may be in IT sector, may be in banking sector or in construction sector or in pharmaceutical sector.
Types of mutual fund:
ELSS stands for equity linked saving schemes . It is defined as diversified equity mutual funds with a tax benefit under section 80C of the income tax act (3 Years lock in period).
Debt funds??are mutual??funds??that invest in fixed income securities like bonds and treasury bills. Gilt??fund, monthly income plans, short term plans, liquid??funds, and fixed maturity plans ??are some of the investment options in??debt funds.
A balanced fund is nothing but invests in both equity and debt funds.
A new fund offering is a new mutual fund scheme.
A systematic investment plan is periodic investment in a mutual fund. The investor puts in a fixed amount every month or every 3monts. So you can say SIP is nothing but a sleep in peace.
Suppose every month you are investing 1000 in your selected mutual fund. At the end of the year your total investment will be 12,000. Depends on the NAV value you have gained some units every month. Suppose in the first month NAV was Rs 10, you received 100units. Second month NAV value is 20 and you received 50 units. And third month NAV value in Rs 30 and you received 33.33 units. Thus you will be receiving some units every month and it will be averaged .So you will get units as per NAV value of the day when purchased.
In India, Mutual funds are governed by SEBI (Mutual funds) regulations 1996, which protects the interests of the investors.
Returns from mutual funds:
As we have said earlier mutual fund is divided into units rather than share. Units have a buying and selling price at given time and difference between buying and selling known as bid-offer-spread. That???s mean after paying the operating costs the fund earnings are distributed to the investors. Funds usually give investors a choice to either receive the earnings in the form of dividend or to reinvest the dividend to buy new units in the market.
Ways of mutual fund investments:
You can invest into mutual fund through
- A bank
- A sales person
- A company distributor
Along with that you should look for below things positively as mutual funds investment are subject to market risk
- Hidden expenses
- NAV history
- Past returns
To invest in mutual fund??please check below details:
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