What Is A Mutual Fund?
8 other friends of us also think alike. We all make a decision that we need to invest in stocks, but we do not have time or energy to do examine, exposure, buy sell, etc.So we hire a "manager" who has the experience and say - see, you can take up to 2.5% of the total value of each year as your expense, but you buy stocks that will grow with time, and sell when the time comes.
Currently, the mutual funds may be abused (the director can escape, etc.) so that the government has arranged the requirements of mutual funds.They should have a sponsor (generally a bank), a number of nurses (some independent), and the asset management company (AMC), which is selected by the Treasurer.
Presume we have put in a lakh each and the total amounts to Rs 10 lakh. We decide that we will issue the "units" to describe our interest in the fund, so that the number 1 lakh units to 10 rupees each. (Thus, each one gets 10,000 units, representing an investment of 1 lakh rupees.)
The director, who is very familiar and informed about purchasing decisions makes the image of what we, the investors have agreed to front - Large Cap stocks only that is to say, or just technology stocks, at least 90% efficiency (only 10% cash), etc.
The value of the entire corpus increases with the increase in stock values. Supposing the value has risen to Rs. 15.6 lakhs in two years. Now we have to pay the treasurer 2.5% per year, around Rs. 60 000 for two years. So, what's left is Rs. 15 lakh.
Thus a value of 1 lakh "unit" is now Rs. 15 lakh, that is to say, each unit will be Rs. 15 -. This is called "net asset value" or NAV.
How to invest
Visit a bank, or check websites online. The banks provide you with the forms and you can write a review fund. The fund will give you a "statement of participation" with the sheet number.
Sales (Redemption of units)
You can use your number portfolio in selling some of your units. Fund releases their NAV regularly, sometimes daily. When the shares are sold it will be on a certain day NAV (usually the day of the sale or the day immediately after). The sold money is given to you in two or three days.
Few sites allow you to invest online - Mutual Funds Trust ago, ICICI Bank and HDFC net banking and live well.
Types of funds
Note that mutual funds can invest in anything - not just stocks. The investment can be in bonds, fixed income, indices of real estate, "from debt into equity", etc. Before investing, the offer document of what is a mutual fund, what the fund will invest in and how much has to be read carefully.
You can also buy open and closed end funds. If you purchase an open-end fund you can sell only when the fund is open. Closed-end funds can be sold on or after a certain date.
About the Author
Author is an expert writer on what is mutual fund and mutual fund.