Learn About Mutual Funds

Introduction

In this blog I am writing about the Mutual Funds and risk factors involved in investing on Mutual Funds.Now a days investing in the share market and mutual funds are become very common and people choose mutual funds for one more reason, TAX Savings. As I heard, most of the people who invested on the Mutual Funds, they don’t have enough knowledge on Mutual Funds and lost money when the share market is going down.

What is Mutual Funds (MF)?

Mutual Funds (MF) are collective investments from the investors and the money managers will be using that investments to buy and sell the shares in Securities Market. There is common believe among people that the Mutual Funds are risk free and they need not bother about what is happening in the market. This is half truth, but if one has good knowledge on the market, he will gain the full potential of Mutual Funds. The money is managed by a expert money manager, so there is less risk on losing more money on the mutual funds.

Share Market and Mutual Funds (MF)

Everything depends on the up and down of the sensex index. When the share market is doing good, your Mutual Funds will get the good value, otherwise you may loss the money if you don’t manage them properly.

What is Net Asset Value (NAV)?

The Mutual Fund Net Asset Value or NAV is the total market value of all the assets, including cash, held by the fund, after deducting its liabilities. The per unit NAV represents the market value of one unit of the mutual fund. It is the price at which investors can buy or redeem the mutual fund’s units. The per unit NAV is computed by dividing the total value of all the assets of the mutual fund, less any liabilities, by the number of units outstanding.

Types of Mutual Funds in India

There is many types of Mutual Funds schemes available in India. Here we will list only three among them.

• Open-ended Mutual Fund Schemes : There is no fixed maturity for the open-ended mutual fund schemes. One has to deal directly with the Mutual Fund for his/her redemption’s and investments. Liquidity is the key feature here. Buying and selling of the units becomes convenient at the related prices of the NAV (net asset value). Some of the open-ended fund schemes in India are ING OptiMix Active Debt Multi – Manager FoF Scheme, ICICI Prudential Very Cautious Plan and Birla Sun Life AAF – Aggressive Plan.

• Close-ended Mutual Fund Schemes : Close -ended schemes are those which have a specified maturity period (which generally ranges from 2 – 15 years). At the time of initial public issue one can make direct investment in the scheme and can also get the benefit of buying and selling of the units. Due to demand and supply in the market plus the policy holders’ expectations and various other market factors, the market price may vary from NAV (Net Asset Value). Some of the close-ended fund schemes in India are ING Vysya Dynamic Asset Allocation Fund and Kotak Dynamic Asset Allocation Scheme.

• Tax-saving Mutual fund Schemes : Individuals, companies, partnership firms, and body corporate are some of the investing parties in the various Mutual Funds available in the market primarily to enjoy the benefits of tax saving. The Indian Mutual Funds are guided by principles of general contract framed by SEBI. It provides certain tax benefits to the fund holders. It is mandatory that tax benefits should be declared in a column which reads “objects of the offering”. SBI Mutual Funds, Prudential ICICI and Bajaj Capital are some of the tax saving Mutual fund companies in India.

I think the above information is enough for basic knowledge on Mutual Funds. I will be writing about the Mutual Funds schemes offered by specific banks in my future posts. I may be missing some of the important points regarding the Mutual Funds. Please add that in the comments. Please post your comments and subscribe to RSS feeds.

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