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Concept of Mutual Funds
A Mutual Fund is a pool of money from a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciation realised are shared by its unit holders or investors in proportion to the number of units owned by them. Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost.
Benefits of Investing in Mutual Fund
- Professional Management
- Diversification
- Convenient Administration
- Return Potential
- Low Costs
- Liquidity
- Transparency
- Flexibility
- Choice of schemes
- Tax benefits
- Well regulated
Types of Schemes in Mutual Funds.
- Open Ended Schemes
- Closed Ended Schemes
- Growth Schemes
- Income Schemes
- Balanced Schemes
- Money Market Schemes
- Tax Saving Schemes
- Sector Specific Schemes
- Index Schemes
NAV of the Fund (Scheme)
NAV calculation will be done at the end of each working day.
Entry Load
This is an amount charged by the mutual fund at the of investment in the scheme.
Exit Load
When investor exits from the scheme he might have to pay certain charges at the time of redemption which is called exit load.
What is Systematic Investment Plan?
To invest in mutual fund one can either invest one time or systematically like investing in the scheme on a periodic basis (e.g. monthly). This will give you the benefit of rupee cost averaging.
Nomination
In case an investor demises all the units will be transferred to the nominee's name(s).
Checklist for investing in Mutual Fund.
- Rating of the Fund.
- Does your investment objective matches with the funds objective?
- Track record of the Fund.
- Track record of similar Fund of other AMCs.
- Profile & performance of fund management team.
- Past track record of the product.
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