It’s been interesting to note that a lot of our readers are enjoying our posted series of finance and trade articles. Not to mention the fact that you dear readers are really benefiting a lot from out tips, information and sheer knowledge regarding savings, money matters and other means of making our lives better financially. This time, out important topic will be about one of the most effective ways of earning surely and hugely, namely the basics of mutual fund.
What is really a mutual fund then?
Well, here are helpful concepts of mutual fund:
1. A Mutual Fund is a trust that basically gathers together or pools the savings of a number of investors who share a common financial goal, the aim is definitely to earn more income or interest.
2. The total investment or amount of money thus collected is then invested in capital market instruments such as shares, debentures and other securities. This will usually be further invested in profitable monetary ventures.
3. The income earned through these investments and the capital appreciation realized are shared by its unit holders in proportion to the number of units owned by them. This then will be divided accordingly to all investors at the end of an entire year which is called profit sharing
4. Thus, a Mutual Fund is the obviously 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.
Moreover, every Mutual Fund is actually managed by a fund manager or expert, who using his investment management skills and necessary research works ensures much better return than what an investor can manage on his own. This is therefore the greatest advantage for common investors.
Now, 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. This simply means to say that all the investments of the company is actually shared by all the investors themselves. Whatever profit will therefore be shared equally by all the investors.
Any change in the value of the investments made into capital market instruments (such as shares, debentures,and the like) 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)
Hope you all enjoyed our best mutual funds articles. Read detail article about what is mutual fund.
Below are available on best reading about mutual fund. You better click them now and further your knowledge 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
- Benefits of Mutual Fund
As a conclusion, investing in a mutual fund is definitely a win-win situation. You can never be mistaken with this decision of investing with mutual fund type of investment. This indeed will become a long run money earning device that will give you more than enough money in the future. So what are you waiting for, go now and contact the nearest bank or company for mutual fund investment!
