How mutual Funds Work


Nowadays, mutual funds are becoming a preference among the investors because it is a type of investment vehicle that gives diversification, liquidity and professionally management. Are you looking for an investment vehicle that can help you avoid the risks associated with choosing individual assets? In this case, Mutual Funds should be your choice, as these are the investment vehicles that cater to the needs of the investor and provide diversification by investing into different assets classes.

Mutual pools the money of the investors and invest in the portfolio of various assets classes. By investing your money along with the other investors, you will are able to invest in portfolios that you might not be able to afford on your own.

The investors invest their money through Asset Management. Companies/Mutual Fund Companies, these companies handover the investment amount to the professionally qualified fund managers for the allocation of invested money into different asset classes. These fund managers invest in schemes that provide maximum returns to the investors, the returns generated on these investments are then distributed among the investors.

Mutual Funds are not traded like stocks and the price of the mutual fund is calculated at the end of every trading day. The price of the mutual fund is called Net Asset Value (NAV) and the calculation of the NAV is done on the entire value of the assets under that fund divided by the total number of shares.

Mutual Fund NAV= Value of stocks/Number of shares outstanding

Mutual funds are the investment vehicles that do not charge any upfront fees, earlier entry loads were charged on mutual funds and these were abolished by SEBI in July 2009. However, certain exit loads are charged on MF’s that are redeemed before one year, the exit loads charged on MF’s encourages the investors to invest for a longer term. Mutual Funds are a diversified investment that involves active management of money on a daily basis.

Read More:- Open Direct Mutual Fund Account with PLANYOURWORLD

Comments

  1. Unknown31 December 2018 at 00:42

    Oh! This is a nice post. I understood a lot about it. Can you also share information on income tax saving as well? I want to know everything about it before I actually invest in something. Also, I want to take a house loan too as want to buy a house for my parents.

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