Understanding Total returns and NAV in Mutual Funds

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Now since you have already read and understood(ho[efully) my previous 2 posts about Mutual Funds. Now I can go ahead in explaining what is little complex in understanding 'Total Returns' and 'NAV'.
For those who have not read previous posts about Mutual funds and NAV basics, following are the links(read them before continuing with this post
MF - basics|working|benefits
Net Asset value(NAV) basics

Starting with basics about what do you understand by 'total return', it stands for either 'Income/yield' or/and 'capital appreciation' in Mutual Funds. Capital appreciation is also referred as increase in NAV. Basically Capital Appreciation means if one or more of your fund's holdings is selling for a higher price than it was when the manager purchased it. If the manager sells the new, pricier stock or bond, then it is known as capital gain. 'Income/yield' from a Mutual Fund is calculated by adding the income distributions over the last 12 months and dividing that by the sum of the last month's ending NAV and adding any capital gains over the same 12-month period.

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Mutual Funds Investing - Basics | Working | Benefits

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Mutual Funds basics:
Mutual funds is a way of investing in stock markets when group of like minded small investors club their money together and then hire a manager for the money to invest into stock market, All the analysis activities in choosing the stock is put on this manager. Advantage of Mutual Fund investing is that by pooling the money together, investors can target broad range of stocks which was not possible if they wnet alone for investing in stock market. These group of investors would not meet each other ever though.

How Mutual funds work
There are numerous Mutual Funds companies(MFC henceforth) in India. When a person invest in a MFC it buys an ownership stake in the company(kind of share holding but here it is called NAV or net asset value). Price of single ownership unit in a Mutual Funds company is called Net Asset Value or NAV. for eg if you invest INR 10000 in MFC with NAV or INR 100, then you have 100 shares of this Mutual Funds Investing company. These MFC's hire fund managers for analysis and investment of the collected money into stocks, they keep certain fees though. There are numerous MFC's which specializes in stock investment in a particular sector stocks like 'Oil and Gas' , ' Infrastructure' or 'Information technology' etc. If a MF's has portfolio of 500 stocks then MF investors becomes miniature owner of that stock.

Benifits of Mutual Funds Investing
Less capital required - You can invest in mutual funds with a very less amount and still own large portfolio which might not be possible if you invest individually, because in individual investment it is likely that you would run out of money befor purchasing nth stock.
Ease of buyinh/selling: Mutual fund company will give you cash whenever you're ready to sell the stock. Investors who own closed funds can also sell at any time.
MFC are highly regulated: A group has to satisfy lot of regulators requirements before starting a Mutual Fund company, hence there are very less chances of fraud, you will not hear that fund manager took the money and dissapeared (loss is another thing).
Investments are Professionally managed: Mutual Funds companies higher professionals for managing money and doing market analysis before investing money in best stock option available, Individual investor might not have time for doing self analysis before stock purchase.

So we can conclude Investing in Mutual Funds is a good way for investing in stock markets, but as we all hear now and then "Mutual Funds investments are subject to market risks, please read the offer document carefully before investing"

Advantages of Mutual Funds Investing

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Investors often get confused in choosing Mutual Funds over stocks or any other investment domain. Mutual Funds Investing has very advantages over other form of investment and has a certain level of risk involved. In this post I would discuss about advantages of investing in mutual funds.

Diversified small investments: Mutual Funds investment is done in various industries which are often from different domains of operations like Auto, Pharma, Oil and Gas etc. This approach helps in reducing loss making risks as if one sector is under pressure then other may be rising, Pharma is sector which is recession proof and evergreen. Also you make small investments and this further reduces the amount of risk you are into.

Lots of choices: Investor can pick a mutual fund which invests in his favourite area of expertise. This can vary from one investor to another according to their profile and risk taking guts.

Well Regulated Mutual Funds: Mutual funds are well regulated and governed by rules and regulations made by SEBI, which are designed to protect the interests of the investor. Distributors or Advisors who advise investors on which mutual finds to invest in are also required to be compulsorily AMFI certified i.e. they are required to pass certain uniform tests that will ensure their knowledge and expertise to advise other people. Mutual Funds are also managed by professionals.

Tax Saving Advantages: dividend from Mutual funds is presently non-taxable

So be smart investor and invest in Mutual Funds.

Top ten Mutual Funds by performance in India

There is loads and loads of news about number of mutual funds on almost every business tv channels in India these days, some of them are promising while others are completly dumb mutual funds yet they advertise as they are the best Mutual Funds available in India , which is infact very confusing for a new person who is interested in Mutual Funds investments.

here is the list of top 10 mutual funds according to their actual return percentage please refer to following list and be careful while investing in Mf's which are not in this list. You can always read my post on Mutual Funds investing.

Mutual Fund	Category	3 Year Return
IDFC Premier Equity	Equity	20.92 percent
ING Dividend Yield	Equity	20.36 percent
Reliance Regular Savings Equity	Equity	19.58 percent
Birla Sun Life Dividend	Equity	18.72 percent
UTI Dividend Yield	Equity	18.68 percent
ICICI Prudential Fund	Equity	17.34 percent
HDFC Top 200	Diversified	17.16 percent
Reliance Regular	Hybrid	20.14 percent
HDFC Prudence	Hybrid	16.24 percent
Canara Robeco	Debt	13.85 percent