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This post for Mutual funds investing can be considered as continuation to my previous posts for tips on Mutual Fund investing, which can be found hereMutual fund investing tips and is related to my other posts on Mutual funds whose links are below(So that you can know each and everything about What Mutual Funds are? How they work? Top 10 Indian Mutual Funds or you may want to know about Mutual Funds companies present in India.
You can use this post as a tutorial for starting investing your money in Mutual Funds but using your own brain is atmost important.
I'll start with a very basic question which will clear some air about what Mutual funds investing is?
A company which brings a Mutual Fund issue in market requires money to invest in various domains which can range from Infrastructure, technology, Govt Bonds, Share markets etc etc. The difference is only our money for investing would be negligible as compared to pool of money which the company collects from various Mutual Funds investors. This helps in getting advantages available for large investments as compared to smaller investments.
The other question which arrives about Mutual Funds is about the Net Asset value or NAV for Mutual Fund so what is Net Asset Value (NAV) of a mutual fund?
- The Net Asset value of a Mutual Fund is Market value of the Assets of Mutual Funds or indirectly we can say NAV is profit which a Mutual Fund has made after subtracting all the liabilities, Managing company's fees or commision and other taxes. You can estimate your share of the holding of the mutual fund by the Net Asset Value per unit. So it is always important to know about NAV rather the return percent in order to invest in Mutual Funds, Majority of the MF Agents just donot talk about NAV's and fool the potential investor by simply talking of return percent which is of no use at all.
Now I hope you are clear about NAV's and Mutual Funds I would explain how a Mutual Fund actually works?
It's rather simple to understand how a Mutual Fund works, A Company which floats a Mutual fund in market hires professional's or they may be it's own employees. When they get investors money then the Professional's decide where to invest, but in many cases it is predefined in which sector they will invest investors money, you may have heard like, Equity funds, Infrastructure funds etc , These are nothing but investment funds with predefined domain of investment. And the investors invest by seeing the Net Asset value of the mutual Funds, The higher the NAV more expensive it would be to invest. The advantage of MF investing is that since a particular individual invest in very small amounts the risk is very less of a bankruptcy of that investor(in case of loss).
I hope by now you are very much clear about all the basic questions about Mutual Funds and Mutual funds investing, you are now ready to follow tips for Mutual Fund Investing.
HAPPY Mutual Fund Investing!!
