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mutual fund basics
If you have not started investing and saving for a rainy day, it must be the first thing you figure out to do. Of course, there is the huge advantage of saving for a future date and for higher responsibilities like owning a home or a car – but is it enough to just save money year on year? Would it beat inflation in the first place by just keeping your money in the bank? Not really. You have to think about smart investment points that would grow your money instead of keeping your money growing at the bare minimum percentages.
Investing in an
online mutual fund would be the smartest and best way to make your money grow for you quickly. You can now invest in these funds at any time from any place. You have access to your investment online and with a secure payment process; the entire plan is almost paperless. There are quite a few funds you can look at buying provided they are from branded firms and you can decide which plan would suit your need. Look and invest into plans that give out timely dividends as well as strong investment values. The net asset value of the fund is the most important metric when you are investing in a fund. It would give you a clear idea on the growth of the stock and how well it has grown over the time you have invested.
Many of us do not understand it, but the benefits are more towards the downside of the market than the upward trend. When you enter an online
mutual fund, it may not be the lowest point of the price cycle or the net asset value that is running then, but since you are investing in this continuously over a period of time, you would buy it during the lower points to over a year or even more. So, when the price of the mutual fund comes back to its original value, it has already led you into a sizeable profit. It is this reason that most mutual fund investments are on the long run and not on the shorter period.
Not only would an investment like this protect you in a situation of financial instability, but also gives you profit on the long run with minimum monitoring of the stock market. If you have been thinking of investing in mutual funds, the time could not be better.
If you have been working for a few years in India, chances are quite high that you have heard of investing in mutual funds many times. In that past, most of these kinds of investments were driven through agents. It’s a lot different now as you would get to know every bit of information about these investments online and that surely makes your decision easier. If you have been thinking about making an investment, here are a few simple methods:
1. Invest via an AMC: You can invest into a mutual fund by approaching the mutual fund companies directly. Each of the companies provide online facilities to invest from the second investment onwards and thus are able to complete your transaction easily. Sounds good? Well almost. In this process, you have to fill the first form at the office of the AMC, so apart from the first investment; the rest can be done on the internet. The tough end of this deal is if you want to participate in 3-4 different funds, that means you have go to each of the offices and have the first form filled and submitted. So, this investment makes sense only when you are going to invest a big amount of money and over a long period of time too. Plus, you do not really need a demat account for this.
2. Use your Demat account: The most common and recommended methods would be to use your demat account. You can look through all the different mutual funds and easily make your investments. All it would take is a few clicks on your mouse, to choose to invest in the fund of your choice. The only catch would be the charges you have to pay the demat medium you use. The biggest advantage though is that you can have access to all your transactions and details from one place alone. How easy is that?
3. Use the fund directly: Certain funds allow you to purchase mutual funds online, that means not having to go through a broker or source at all. You would have all the possible information you need about the mutual fund along with the performance of the fund over the years. It is a very easy solution no doubt and is a sure option on the long term. You would have lesser commissions to pay and thus is a great idea if you are planning to invest on the long term.
All of us know that investing in a
mutual fund today is a must. There are great investment benefits and you would
get certain tax benefits too. One of the key points you must follow when you
are investing in them the ‘net asset value’. This number represents the per
share market value of the fund you have chosen. In simpler words, it is the
price with which investors are bidding to fund shares from the company and also
to sell them too.
So, how do you derive this value
for a mutual fund? It is quite simple – you have to add the complete total of
cash and securities in the fund portfolio (the assets) and remove the
liabilities that are present. For example, let’s say a fund has the assets of 3
million and the liabilities of 2 million; then the NAV of the fund would be 1
million.
The computation of mutual fund NAV is calculated at the
end of every day and is of great importance to investors. You can also figure
out the real time NAV performance based on the traded fund series. In other
words, you can easily find out the price per unit of the fund, by dividing the
NAV by the number of outstanding units. This would be different from that of a
common stock that is in the stock market. While this is based on supply and
demand forces, that of the stock market is purely on market sentiment.
Using the NAV of a fund, you can
easily understand the present condition of the fund. You can also chart out a
series to figure out how the demand for the fund would be. You would not be
able gauge the performance of the fund though as it would be independent of the
NAV.
One of the first excitements after you start earning is to make your first investment. You are curious as to the ways you can make the investment and if you have to just start small and choose amongst the many options to take the plunge. Just like any other first time investor, you are bound to come across many ideas from friends, colleagues and well wishers and probably, one of them would be
mutual fund investments.
What is mutual fund?
A mutual fund is an investment programme that is promoted or created by shareholders amongst diversified holdings and trading. This is professionally managed and you would have experts looking after your investment, giving you a massive benefit. The mutual fund definition itself means creating a portfolio among different companies so as to get a balanced return.
How to make an investment?
One of the first tips for investment in a mutual fund is to understand the kind of companies that are going to be a part of the portfolio and the period of investment. You can gauge an approximate of the growth thinking about the industry as well as the exit time horizon. You would know how long you would be participating in the mutual fund as a whole too. It is key to understand what the estimates are from the mutual fund investments and how you can get the best results from it.
The main idea would be to keep a close watch on the growth of the fund and since it is one of the first investments to make, you can choose similar funds in the future. It is important to notice that these predictions being made are by experts and that they would consider the past and present market conditions to determine the future growth of the mutual fund.
Rarely does one make a profit out of an investment without research. Before you look at investing your money, you must look at the market conditions and if the investment matches your requirement. There are several factors that contribute to the success of a fund investment and timing and fund selection are the most important of them. Yes, there are different requirement for so different investors, so let’s take a look at what you should know before you invest in mutual funds.
What is mutual fund in the first place? It is a diversified investment in a set of companies or equities that will give you a return over a period of time, based on the performance of the overall set of companies. You can choose sector specific mutual funds which can be targeted to pharmaceuticals, energy, petro companies and so on. You can also invest based on the market cap of the company. Large cap, medium cap and small cap are the three major kinds. It is based on your take to a volatile investment that you can choose which of the three to choose. These are the
mutual fund basics that you have to know before you go ahead making an investment. These are tax saving funds too and would give you a healthy benefit in income tax. To understand which kind of
mutual fund definition of market cap would suit you best – speak to your financial advisor or an industry expert. The performance of your investment depends on the market condition and hence you require expert guidance.
