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Sunday, 4 June 2017

Mutual Fund

What is Mutual Fund? Ans: A mutual fund is an investment vehicle made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks,bonds,money market instruments and similar assets. Mutual funds are operated by money managers, who invest the fund's capital and attempt to produce capital gains and income for the fund's portfolio is structured and maintained to match the investments objectives stated in its prospectus.
One of the main advantages of mutual funds is they give small investors access to professionally managed,diversified portfolio of equities,bonds and other securities. Each share holder,therefore,participates proportionally in the gain or loss of the fund. Mutual funds invest in a wide amount of securities,and performance is usually tracked as the change in the total market cap of the fund derived by aggregating performance of the underlying investments. Mutual fund units or shares,can typically be purchased or redeemed as needed at the fund's current Net Asset Value(NAV) per share, which is sometimes expressed as NAVPS. A fund's NAV is derived by dividing the total value of the securities in the portfolio by the total amount of shares outstanding.
Mutual funds are investment strategies that allow you to pool your money together with other investors to purchase a collection of stocks, bonds, or other securities that might be difficult to recreate on your own. This is often referred to as a portfolio. The price of the mutual fund, also known as its Net Asset Value(NAV), is determined by the total value of the securities in the portfolio, dividend by the number of the fund's outstanding shares. This price fluctuates based on the value of the securities held by the portfolio at the end of each business day. Note that mutual fund investments do not actually own the securities in which the fund invests they only own shares in the fund itself.
In the case of actively managed mutual funds, the decisions to buy and sell securities are made by one or more portfolio managers supported by teams of researchers.A portfolio manager's primary goal is to seek out investment opportunities that help enable the fund to outperform its benchmark, which is generally some widely to allowed index, such as the standard & poor's 500. One way to tell how well a fund manager is performing is to look at the returns of the fund relative to this bench mark. Note that while it may be tempting to focus on short-term performance when evaluating a fund, most experts will tell you that it is best to look at long-term performance, Such as three and five years returns.
For the average small investors, mutual funds can be a smart and cost-effective way to invest you don't have to a lot of money-most fund will let you buy shares with as little as Rs.5000/- up front and invest as little as Rs.500/- per month. Buying shares in a mutual fund is also an easy to help diversity your investments, which is really another way of saying that you won't have all your eggs in one basket. For instance, most mutual funds hold well over 100 securities. For someone with just a few thousands Rupees to invest, building and managing a portfolio containing that many securities could potentially be highly impractical, if not impossible.

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