Basic Of Mutual Fund

Mutual Fund:Mutual funds are investment companies that pool money from investors at large and offer to sell and buy back its shares on a continuous basis and use the capital thus raised to invest in securities of different companies. In this you amount is invested in different companies according to percentage ratio. Below are our best reading on mutual fund: • • • • • •

What Mutual Fund do with investor's Money Concept of Mutual Funds Benefits of Mutual Fund What is Net Asset Value (NAV) What Is Mutual Fund? Post Office FD Vs Mutual Fund

Now How mutual funds different from portfolio management schemes? Mutual funds pool investors funds and manage their portfolio with the help of their fund manager. Portfolio management is meant for individual investor - an investor hands over his portfolio to a portfolio manger to help him to decide the investments made on behalf of himself. The portfolio managers charge hefty sums for managing your money. Friends In case of mutual funds, the investments of different investors are pooled to form a common investible corpus and gain/loss to all investors during a given period are same for all investors while in case of portfolio management scheme, the investments of a particular investor remains identifiable to him. Here the gain or loss of all the investors will be different from each other. Invest for long term in mutual fund SIP for more profit. What is meant by long term investment? Does it mean that buying at any price and wait for 3-4 years? Think twice. Give importance to Value; Give importance to Growth; Give importance to Price; these values are much more important statistics than Investment duration.

MUTUAL FUNDS FAQS What is a Mutual Fund?

A mutual fund is a trust. It pools money from like-minded shareholders and invests in diversified portfolio of securities, through various schemes that address different needs of investors. The pool of money thus collected is then invested by the Asset Management Company (AMC) in different types of securities. These could include shares, debentures, convertibles, bonds, money market instruments or other securities, based on the investment objective of a particular scheme. Such objective is clearly laid down in the offer document for that scheme. The fund adds value to the investment in two ways: income earned and any capital appreciation realized through sale. This is shared by unit holders in proportion to the number of units they own.

What is an Asset Management Company An AMC is involved in the daily administration and also acts as investment advisor for the fund. An asset management company is promoted by a sponsor which usually is a reputed corporate entity with sound record of profits. An AMC typically has three departments: Fund Management Sales & Marketing Operations & Accounting

What are the different types of mutual fund schemes

Mutual fund schemes can be classified as follows:

What is the difference between an open ended and close ended scheme? Open ended funds can issue and redeem units any time during the life of the scheme. Close ended funds cannot issue new units except through a bonus or rights issue. Hence, unit capital of open ended funds can fluctuate daily. Further, new investors to an open ended fund can join the scheme by directly applying to the mutual fund at applicable Net Asset Value-related prices. In the case of close ended schemes, new investors can buy units only from the secondary market What is a Prospectus or Offer Document? It is a document which an open-end fund, or newly issued closed-end fund, is required to provide to investors. Funds say that investors should read it carefully before investing or sending money. A prospectus contains descriptions of:

Fees, in a standardized format Investment Objective Some financial data Investment methods Risk factors and description Investment management and compensation Dividend and Capital Gain distributions Other services

What is the Net Asset Value (NAV)? The net asset value (NAV) is the market value of the fund's underlying securities. It is calculated at the end of the trading day. Any open-end funds buy or sell order received on that day is traded based on the net asset value calculated at the end of the day. The NAV per units is such Net Asset Value divided by the number of outstanding units Market

NAV

Value

of

Assets

-

Liabilities

= - - - - - - - - - - - - - - - - - - - - - - - - - - - - Units Outstanding

What are Dividends? A mutual fund may receive dividend or interest income from the securities it owns; it is required to pay out this income to its investors. Most open-end funds offer an option to purchase additional shares with the dividends. Dividends are often made monthly or quarterly, though many funds make distributions only yearly Are investments in mutual fund units safe?

No stock market related investments can be termed safe with certainty; they are inherently risky. However, different funds have different risk profile, which is stated in its objective. Funds which categorize themselves as low risk, invest generally in debt which is less risky than equity. Anyway, as mutual funds have access to services of expert fund managers, they are always safer than direct investment in the stock markets What are the Risks in a Mutual Fund? Equity Funds are open to market risk i.e. there is a possibility that the price of the stocks in which the Fund has invested may decrease. Of course, the prices may also go up, making it possible for the Fund to earn profits Debts Funds are open to two main risks - Credit Risk and Interest Rate Risk. Credit Risk refers to the possibility that the company that has issued the bond or debenture in which the Fund has invested may default on interest or on principal payments. Debt Fund managers take care of this by investing in bonds which have good credit rating Interest Rate Risk refers to the possibility that the price of the bond in which the Fund has invested may go down because of an increase in the interest rates in the economy. In general, it is useful to remember that this is a "see-saw" relationship bond prices (and therefore, NAV) goes up when interest rates drop and drops when interest rates rise

What are the benefits of a Mutual Fund?

Your money is managed by experienced and skilled professionals Your investment is automatically diversified over a large number of companies and industries, thus reducing the element of risk Your money is very liquid, especially in an open-end fund The potential to provide a higher return over the medium to long term is better in a wide range of securities than in any one The costs of research and investing directly in the individual securities are spread over a large corpus and thousands of investors thus minimizing individual share There is a high degree of transparency in the operation of a mutual fund, so you can take investment decisions based on more information You have a choice of schemes to suit your needs The industry is well regulated with many measures oriented towards investor protection

Do Mutual Funds assure returns? Some mutual funds have floated "assured" return schemes that guarantee a certain annual return. At present, there are very few funds who assure returns as they have realized that it is not possible to assure returns in a volatile market next, you can make a profit by selling the mutual fund units at a price higher than that at which you bought them. This is capital gain. (If you sell the units at a lower price, you make a capital loss.) Finally, the value of the units you hold can appreciate. This is unrealized capital gain. Dividends and capital gains are treated differently

How do you make money in a Mutual Fund?

First you can earn a dividend from the Mutual Fund. Most Debt Funds declare dividends around once in six months in their Dividend Option. If you do not want the dividend, you can choose to be in the Cumulative Option. When a dividend is declared, the NAV of the units will fall, since dividend is paid out of the appreciation in the value of the unit What are the tax benefits for investing in mutual fund units? 20% rebate on contribution up to Rs 10,000/- under ELSS (equity linked saving schemes) Who should invest in Mutual Funds? Mutual Funds can meet the investment objectives of almost all types of investors. Younger investors who can take some risk while aiming for substantial growth of capital in the long term will find growth schemes (i.e. funds which invest in stocks) an ideal option Older investors who are risk-averse and prefer a steady income in the medium term can invest in income schemes (i.e. funds which invest in debt instruments). Investors in middle age can allocate their savings between income funds and growth funds and achieve both income and capital growth. Investors who want to benefit from regular savings, save a small sum every month, can use the Systematic Investment Plan As mutual fund schemes invest only in stock markets, are they suitable for small investors? Mutual funds are meant for small investors. The prime reason is that successful investments in stock markets require careful analysis which is not possible for a small investor. Mutual funds are usually equipped to carry out thorough analysis and can provide superior returns

What Mutual Fund do with investor's Money Now today question is that What does a Mutual Fund do with investor's money?Before answering on that I want to show some best article that are based on mutual fund. Read detail article about what is mutual fund. Below are available on best reading about mutual fund. • • • • • • •

Concept of Mutual Funds Post Office FD and Mutual Fund What is a Mutual Fund Advantage of SIP(Systematic Investment Plan) What is Net Asset Value(NAV) Mutual Fund and ULIP Benefits of Mutual Fund

Mutual Funds are financial intermediaries. They are companies set up to receive your money, and then having received it, make investments with the money Via an AMC. It is an ideal tool for people who want to invest but don't want to be bothered with deciphering the numbers and deciding whether the stock is a good buy or not. A mutual fund manager proceeds to buy a number of stocks from various markets and industries. Depending on the amount you invest, you own part of the overall fund.The beauty of mutual funds is that anyone with an investible surplus of a few hundred rupees can invest and reap returns as high as those provided by the equity markets or have a steady and comparatively secure investment as offered by debt instruments. A Mutual Fund invests the pool of money collected from the investors in a range of securities comprising equities, debt, money market instruments etc. after charging for the AMC fees. The income earned and the capital appreciation realised by the scheme, are shared by the investors in same proportion as the number of units owned by them.Anybody with an investible surplus of as little as a few hundred rupees can invest in mutual funds. The investors buy units of a fund that best suits their investment objectives and future needs. A Mutual Fund invests the pool of money collected from the investors in a range of securities comprising equities, debt, money market instruments etc. after charging for the AMC fees. The income earned and the capital appreciation realised by the scheme, are shared by the investors in same proportion as the number of units owned by them.

Concept of Mutual Funds Today we will talk about mutual fund basic, I want to show in detail about concept of mutual fund. Here is concept of mutual fund: 1. A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. 2. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. 3. The income earned through these investments and the capital appreciation realised are shared by its unit holders in proportion to the number of units owned by them. 4. Thus a 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.

Every Mutual Fund is managed by a fund manager, who using his investment management skills and necessary research works ensures much better return than what an investor can manage on his own.

When an investor subscribes for the units of a mutual fund, he becomes part owner of the assets of the fund in the same proportion as his contribution amount put up with the corpus (the total amount of the fund). Mutual Fund investor is also known as a mutual fund shareholder or a unit holder. Any change in the value of the investments made into capital market instruments (such as shares, debentures etc) is reflected in the Net Asset Value (NAV) of the scheme. NAV is defined as the market value of the Mutual Fund scheme's assets net of its liabilities. NAV of a scheme is calculated by dividing the market value of scheme's assets by the total number of units issued to the investors. Example: • • • • •

If the market value of the assets of a fund is Rs. 100,000 The total number of units issued to the investors is equal to 10,000. Then the NAV of this scheme = (A)/(B), i.e. 100,000/10,000 or 10.00 Now if an investor 'X' owns 5 units of this scheme Then his total contribution to the fund is Rs. 50 (i.e. Number of units held multiplied by the NAV of the scheme)

Benefits of Mutual Fund

Before we start to describe about mutual fund advantage, I want to show you what is a mutual fund. Mutual fund: Mutual funds are investment companies that pool money from investors at large and offer to sell and buy back its shares on a continuous basis and use the capital thus raised to invest in securities of different companies. In this you amount is invested in different companies according to percentage ratio. Mutual funds can be either or both of open ended and closed ended investment companies depending on their fund management pattern. Read detail article about what is mutual fund. Below are available on best reading about mutual fund. • • • • •

Post Office FD and Mutual Fund What is a Mutual Fund Advantage of SIP(Systematic Investment Plan) What is Net Asset Value(NAV) Mutual Fund and ULIP

There are several benefits from investing in a Mutual Fund (Advantage of Mutual Fund). Small investments : Mutual funds help you to reap the benefit of returns by a portfolio spread across a wide spectrum of companies with small investments. Such a spread would not have been possible without their assistance. Professional Fund Management : Professionals having considerable expertise, experience and resources manage the pool of money collected by a mutual fund. They thoroughly analyse the markets and economy to pick good investment opportunities. Spreading Risk : An investor with a limited amount of fund might be able to to invest in only one or two stocks / bonds, thus increasing his or her risk. However, a mutual fund will spread its risk by investing a number of sound stocks or bonds. A fund normally invests in companies across a wide range of industries, so the risk is diversified at the same time taking advantage of the position it holds. Also in cases of liquidity crisis where stocks are sold at a distress, mutual funds have the advantage of the redemption option at the NAVs. Transparency and interactivity : Mutual Funds regularly provide investors with information on the value of their investments. Mutual Funds also provide complete

portfolio disclosure of the investments made by various schemes and also the proportion invested in each asset type. Mutual Funds clearly layout their investment strategy to the investor. Liquidity : Closed ended funds have their units listed at the stock exchange, thus they can be bought and sold at their market value. Over and above this the units can be directly redeemed to the Mutual Fund as and when they announce the repurchase. Choice : The large amount of Mutual Funds offer the investor a wide variety to choose from. An investor can pick up a scheme depending upon his risk / return profile. Regulations : All the mutual funds are registered with SEBI and they function within the provisions of strict regulation designed to protect the interests of the investor. A Mutual Fund is not an alternative investment option to stocks and bond; rather it pools the money of several investors and invests this in stocks, bonds, money market instruments and other types of securities. A Mutual Fund is a trust that pools the savings of 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 in proportion to the number of units owned by them. Thus a 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 NAV Net Asset Value (NAV) is the actual value of one unit of a given scheme on any given business day. The NAV reflects the liquidation value of the fund's investments on that particular day after accounting for all expenses. It is calculated by deducting all liabilities (except unit capital) of the fund from the realisable value of all assets and dividing it by number of units outstanding. The mutual fund company adds up all the stocks they own in the mutual fund,

subtracts their expenses, and divides by the number of shares outstanding. This is the NAV.Many sites on the web show expense ratios for mutual funds. The lower the expenses, the more of your money you get to keep! Asset Management (mutual Fund) Companies allocate units against the money invested by us. NAV is the value of 1 unit allocated. The NAV increases when the shares (stocks) held by the Asset Management company appreciate and vice-versa. NAV is calculated on daily basis and can be described as the (total value of the assets under the scheme minus the expenses) divided by the total number of units allocated under the scheme. NAV=

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For example, if a fund has assets of 50 Crore Rs and liabilities of Crore Rs, it would have a NAV of 40 Crore Rs.This number is important to investors, because it is from NAV that the price per unit of a fund is calculated. By dividing the NAV of a fund by the number of outstanding units, you are left with the price per unit. In our example, if the fund had 4 Crore shares outstanding, the price-per-share value would be 40 Crore divided by 4 Crore which equals 10 Rs.This pricing system for the trading of shares in a mutual fund differs significantly from that of common stock issued by a company listed on a stock exchange. In this instance, a company issues a finite number of shares through an initial public offering (IPO), and possibly subsequent additional offerings, which then trade in the secondary market. In this market, stock prices are set by market forces of supply and demand. The pricing system for stocks is based solely on market sentiment.

Mutual fund increasing exit load? Friend market is moving down side and now some mutual company are in loss.They want to make money also when any customer exit from mutual fund but this is not a good way. I do not know but there are too much reason behind it.

Because all mutual fund companies are not getting enough profit and this is one of the reason for increasing exit load in mutual fund. Every one do not know about exit load in mutual fund, I want to describe exit load first. What is exit load? Just like entry load some funds impose a fee when you leave the scheme, i.e., redeem your units, called the exit load. Exit load is charged at the time of redeeming (or transferring an investment between schemes). Now In order to plug redemption, ICICI Prudential Mutual Fund has increased the exit load on some of its fixed maturity plan (FMP) schemes for prospective investors from two per cent to as much as five per cent. Most debt fund managers, industry sources said, are likely to similarly increase the exit load on their FMPs in order to stem mass withdrawals in the future. Mission is clear all mutual fund companies are going to increase their exit load but I would like to tell you that if you are long term investor and investing per month in stock market and mutual fund then why exit from mutual fund. Hold all your mutual fund because at this level if you sell them then you would be in great loss hold all investment and keep investing. Now don't get too hassled about loads. Best thing to do when a scheme imposes a new load, is not to invest more money if the load charged is unreasonable. his are top 5 stock at this time you must buy. Top 5 stock buy for 2-3 years Read treading rules before investing.

This are best stock for long term: • • • •

ONGC BHEL Jaiprakash Associates RPL

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State Bank Of India Chambal Fertilisers

SIP adavntages What is SIP? SIP: SIP means Systematic Investment Plan. It is not a type of mutual fund. It is a method of investing in a mutual fund. SIP allows the investor to buy units on a given date every month. The investor decides the amount and also the mutual fund scheme. I want to say that save 1 rupee daily then after 30 days you will got 30 rupee. For saving money we need to follow some method and SIP is one of them. Why invest using SIP? Systematic investing in a mutual fund is the answer to preventing the pitfalls of equity investment and still enjoying the high returns. And it makes all the more sense today when the stock markets are booming. 1. Tension free investment. Management of the fund by the professionals or experts is one of the key advantages of investing through a mutual fund. They regularly carry out extensive research - on the company, the industry and the economy - thus ensuring informed investment. Secondly, they regularly track the market. Thus for many of us who do not have the desired expertise and are too busy with our vocation to devote sufficient time and effort to investing in equity, mutual funds offer an attractive alternative. There for it is tension free investment. 2. SIP invest money in different-different sector Another advantage of investing through mutual funds is that even with small amounts we are able to enjoy the benefits of diversification. Huge amounts would

be required for an individual to achieve the desired diversification, which would not be possible for many of us. 3. Its well-regulated The mutual fund industry is well regulated both by Sebi (Securities and Exchange Board of India) and AMFI (Association of Mutual Funds in India). They have, over the years, introduced regulations, which ensure smooth and transparent functioning of the mutual funds industry. You can change mutual fund time by time, switch in different mutual fund, this is one of the big profit. 4. Does not after our monthly budget With SIP we can invest small amounts (Rs 500-Rs 1,000) periodically in Mutual funds as against larger one-time investment required, if we were to buy directly from the market. In this way, an investment does not appear to be a burden every month. Secondly to prevent losses in volatile markets, investing in Sips is the best option as every month you may get an opportunity to buy at lower levels. 5. Reduces the average cost In SIP we are investing a fixed amount regularly. Therefore, we end up buying more number of units when the markets are down and NAV is low and less number of units when the markets are up and the NAV is high. This is called rupee-cost averaging.Generally, we would stay away from buying when the markets are down. We generally tend to invest when the markets are rising. SIP works as a good discipline as it forces us to buy even when the markets are low, which actually is the best time to buy. 6. Helps to fulfill our dreams The investments we make are ultimately for some objectives such as to buy a house, children's education, marriage etc. And many of them require a huge onetime investment.As it would usually not be possible raise such large amounts at short notice, we need to build the corpus over a longer period of time, through small but regular investments. This is what SIP is all about. Small investments,

over a period of time, result in large wealth and help fulfill our dreams & aspirations What is mutual fund? Mutual fund: Mutual funds are investment companies that pool money from investors at large and offer to sell and buy back its shares on a continuous basis and use the capital thus raised to invest in securities of different companies. In this you amount is invested in different companies according to percentage ratio. Mutual funds can be either or both of open ended and closed ended investment companies depending on their fund management pattern. 1. An open-end fund offers to sell its shares (units) continuously to investors either in retail or in bulk without a limit on the number as opposed to a closed-end fund. Open end fund have no limit in number of shares. 2. Closed end funds have limited number of shares. Advantage of mutual fund: • • • • • •

Lowest per unit investment in almost all the cases start for Rs 10 in INDIA Your investment will be managed by professional money managers so you need not worry about your money. You can merge from one fund to another fund. Easy earning opportunity in share market. For long term they will provide good result. Your investment will be diversified

Disadvantage of mutual fund: •

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Simply one line show you that mutual fund investment is depend on market risk please read offer document carefully before investing means market down mutual fund down. Mutual funds are like many other investments without a guaranteed return so it is not necessary you will get profit from mutual fund.

What is SIP? SIP: SIP means Systematic Investment Plan. It is not a type of mutual fund. It is a method of investing in a mutual fund. SIP allows the investor to buy units on a

given date every month. The investor decides the amount and also the mutual fund scheme. I want to say that save 1 rupee daily then after 30 days you will got 30 rupee. For saving money we need to follow some method and SIP is one of them. Relation between mutual fund and SIP There are two ways in which you can invest in a mutual fund. In my previous article I show the difference between mutual fund and post office fix deposit. 1.) A one-time outright payment •

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If you invest directly in the fund, you just hand over the cheque and you get your fund units depending on the value of the units on that particular day. Suppose you invest Rs 10000 and NAV on that date is Rs 10. So you will get 1000 units (Rs 10000 / 10). If after one year fund NAV is 11 then you value is 11,000 (Rs 11*1000)

2.) Monthly, daily, quarterly or yearly investments •

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This is referred to as a SIP.That means that, every month, you need to invest some money suppose you are investing Rs 1000 per month for three month and at the end of three month your total invests will 3000. Let's say the NAV on the day you invest in the first month is Rs 10, you will get 100 units (Rs. 1000/10). The next month, the NAV is Rs 20. You will get 50 units (Rs. 1000/20). The following month, the NAV is Rs 40. You will get 25 units (Rs. 1000/40). Now total amount invested 3000, total unit you got 100+50+25=175 unit. Current NAV of mutual fund is 41 then your current value is 175*41= Rs 7175.

What is NAV? NAV: NAV is net asset value of a mutual fund. NAV, is the sum total of the market value of all the shares held in the portfolio including cash, less the liabilities, divided by the total number of units outstanding. Thus, NAV of a mutual fund unit is nothing but the 'book value. Your fund value= Total Unit * current fund NAV

*Above are just figure performances, actual value depend on mutual fund and its market performance. This are some best fund in current market. Note: Liquid funds, cash funds and floating rate debt funds do not offer an SIP. These are funds that invest in very short-term fixed-return investments. Floating rate debt funds invest in fixed return investments where the interest rate moves in tandem with interest rates in the economy (just like a floating rate home loan). All types of equity funds (funds that invest in the shares of companies), debt funds (funds that invest in fixed-return investments) and balanced funds (funds that invest in both) offer a SIP. Post office FDs. v/s Mutual Funds This is common question on investor mind for deposit money so the answer is: Both the options are good it depends on your risk appetite and the expected returns from your investments. If you are a high risk taker and expect higher returns from your investments; then you can go for Mutual Funds. If you are a low risk taker and expect capital safety in any circumstance then go for Post office FDs.