Hmmm.. Recently you have heard a lot about Mutual Fund, everyone seems to be talking about it. And every financial institution, from banks to PMCs everywhere seem to be offering this. But these are the hells.
So let’s start with the basic question, “What are mutual funds?” We will drop this line. In simple language, mutual funds is a pool of funds. A generous investor loves his money. How to hire a professional fund manager to play around with your money. A fund manager is responsible for managing the money. He decides where to invest money, when to invest, and when to book a profit. He is the one who is in all power. And the profit he makes in the financial business is shared among the money for their investment. The benefit of such money is obvious. Money is managed by a professional fund manager who has better knowledge than an ordinary investor, and the investor is freed from anxiety. managing money all the time. The concerns are taken care of by the Fund Manager, and the investor just sits back and reaps the benefits (or losses in some cases).
A lot of global money houses have come up that offer mutual funds. These fund houses issue mutual funds in the same way that companies issue their stocks. This fund houses a lot of different types of income from investors who want to invest in mutual funds. The fee is in the form of load entry, load exit and fund management payments. But for a good fund these charges would be negligible compared to the income that is borrowed from the fund.
While they are purchased from stock markets, similarly mutual funds also have a price associated with them called NAV or Net Asset Value. When fund houses launch mutual funds, they define a fund unit (usually $1). Then, as the investments made by the mutual fund increase or decrease, the unit rate increases or decreases proportionally. Investors buy or sell mutual funds only at NAV.
NAV is also a good indicator of mutual operation. Mutual funds whose NAV grows more than those with lower growth. But while judging mutual funds using NAV, we need to look at a wider time horizon of 3-5 years equity. In short term money can fluctuate a lot, and this may not be an index of true performance. However, a larger time horizon gives the true picture about stability and returns. Apart from the NAV, there are some other factors to consider, such as the type of house tax, other funds managed by the manager and the type of portfolio managed by the fund.
Investors buy or sell bonds of mutual funds in the same way they buy or sell stocks. As with stocks, if you want to realize real returns from mutual funds, you need to stay in them longer. Ideally this period should be over 3 years.
There are many different types of loans available. It varies from equity funds that invest primarily in stocks, balanced funds that invest in both bonds and bonds, and debt funds that invest primarily in debt instruments such as bonds. The developer can choose one that fits his risk appetite. Risk-taking investors can go with equity funds, which offer the opportunity to increase income, albeit at a greater risk. And the risk averse investor can go with debt financing. These offer lower returns but almost no risk. I will cover more about the different types of funds in a future article.
So, in a nutshell, if you have the money, but not the time and/or knowledge to monitor it, mutual funds are the way to go. They are like dream investments. You put your money in them, you forget and sleep, after some time you wake up and reap the rewards. I don’t think it could be better.
