Share market - Mutual Fund

 

                                                                Share Market - Mutual Fund

What is Mutual Fund?

                                            

                    

                Mutual fund raises the money from investors and invests that money in securities such as stocks, debts, bonds, and assets. An investor new into the market has no idea of shares and stocks then Mutual fund is a perfect vehicle for them. They are managed by Professional Experts or Fund Managers who have deep skills in the functioning of the investment market. Fund Managers invest the money in a single asset or a mix of different assets with an objective to generate capital gain from the investors. Mutual Funds in India are controlled by Security and Exchange board of India (SEBI).

Why invest in Mutual Funds?

Everyone has their financial goals which are for short term or long term. You may invest to fund for children’s education or may invest to have a substantial corpus after retirement. There are multiple mutual funds based on their tenure and return expectations. Investors can choose their mutual fund according to their needs and the money is managed by fund managers.

Benefits of mutual funds –

1.       SIP Option – There are multiple mutual funds who accept the small amount at regular intervals which is called Systematic investment plan (SIP). You don’t need lump sum amount to invest in mutual funds. If you invest lump sum amount when markets are at high, you may face the loss when markets decline.

2.       Tax Saving plan – Some mutual funds offer tax benefits under Section 80C of the Income tax Act. Equity link saving scheme (ELSS) is often rated one of the best tax saving instruments as the returns are relatively higher than any investment.

3.       Lock-in Period – Open-ended mutual funds do not have lock-in period while tax saving plan have locking period of three years.

4.       Transparency – Mutual funds are controlled by SEBI. SEBI is legally bound to disclose financial statements and fund performance details. You can check the latest fund related info, portfolio performance in monthly document, known as factsheet.

Basic Terms of Mutual Funds –

1.       NAV (Net Asset Value) – The NAV is also known as unit price or price per share of the fund. The net asset value of fund keeps changing depending on the fund’s performance.

2.       Shares or fund Units – In mutual fund investments is made by purchasing the shares or the units of a particular fund. The more units you purchased the greater investment would be.

3.       Lock-in Period – This is a period in which the specified funds unit cannot be sold. If you sold the units during this period then it is subjected to a loss or penalty.

4.       Bid – A bid is simply called Selling Price. It refers to the highest price a buyer will pay to buy a specified number of shares of a stock.

Risk and Return –

                Before choosing the mutual fund always check what type of risk return in that. It means it has High Risk High Return or Low Risk Low Return. If there is a higher risk then greater probability of higher return. If lower risk with a greater probability of smaller return.

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