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Mutual Fund At Glance

MUTUAL FUNDS- AT A GLANCE

Introduction

If we break the phrase 'mutual funds' and analyze the words, we realize that it refers to funds that are raised and invested mutually, i.e. on behalf of everyone participating in the scheme. If you and your friend both pool your money and invest it jointly, you have created your own mutual fund.

So,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 are shared by its unit holders in proportion to the number of units owned by them.

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.

Working of a mutual fund




Common terms used:
• NAV: The performance of a particular scheme of a mutual fund is denoted by Net Asset Value (NAV). Net Asset Value is the market value of the securities held by the scheme. Since market value of securities changes every day, NAV of a scheme also varies on day to day basis. The NAV per unit is the market value of securities of a scheme divided by the total number of units of the scheme on any particular date. For example, if the market value of securities of a mutual fund scheme is Rs 200 lakhs and the mutual fund has issued 10 lakhs units of Rs. 10 each to the investors, then the NAV per unit of the fund is Rs.20. NAV is required to be disclosed by the mutual funds on a regular basis - daily or weekly - depending on the type of scheme.
• Entry load/Exit load :This is the money you have to pay the AMC while you enter the scheme or exit the...