Whether you're planning to buy a house, a car or vacation, a child's education or marriage, Mutual fund is a simple, tax saving and effective tool for these goals. And to fulfill each type of need, the best Mutual funds offer a wide assortment of investment options - equity schemes, fixed income schemes, money market schemes, hybrid schemes, ETFs etc.
Let's scan through MF with a simple lens and understand the basics - how they work, and how best they can serve as an investment tool.
Back to Basics
A mutual fund is a collective kitty of stocks and/or bonds owned by different investors. These investors have a common goal to score and hence, their money is invested in different asset classes matching the fund's investment objective. Each investor's shares represent a portion of the holdings of the fund. Investors get units of the mutual fund according to the amount they have invested.
Your fund managers assigned by the Asset Management Company (AMC) manage these investments. The best Mutual funds are generally well diversified to offset potential losses.
To put it simply,
You register with an AMC
Your assigned fund manager invests in the MF pool, as per your need
Returns are collected from the pool investment
Returns are passed onto the investors
Why is NAV important?
Net Asset Value (NAV) is a fund's per share market value and is calculated by the AMC at the end of every business day. In order to calculate the NAV of a mutual fund, you need to take the current market value of the fund's assets minus the liabilities, if any, and divide it by the number of shares outstanding. This number is important to investors, because you can calculate the per unit price of a fund using NAV. By dividing the NAV of a fund by the number of outstanding units, you are left with the price of one unit.
The NAV number helps the investor in calculating the number of units you can buy in a certain scheme.
The NAV number helps in calculating redemption amount and profit of an invested amount.
The NAV number helps the investor in gauging the general performance of a particular scheme over time.
Why you should invest in best Mutual Funds?
Because benefits are plenty
Managed by professionals
If you've registered with a renowned and experienced AMC, thorough professionals will manage your mutual fund. So even if you don't have the time or enough skill for the task, you can invest in the best Mutual funds. However, make sure you keep a routine check on your assets.
The best Mutual funds widen investment opportunities across industries and asset classes. You can reap benefits without investing a large amount of money that would be required to build an individual portfolio.
Unless your mutual fund investment has a lock-in period, your money is available to you anytime you want. Based on how soon you want to withdraw you might have to bear the exit load but you'll get the money in a couple of days transferred directly to your bank account.
Plethora of Options
The best Mutual funds offer a wide range of schemes. So depending upon your goal you can plan your investments with the help of your fund manager.
Once you've invested in the best Mutual funds, all the information about your investment will be made available to you periodically. Funds provide investors with updated information pertaining to the markets and schemes through fact sheets, offer documents, annual reports etc. .
All Mutual funds in India are regulated and monitored by the Securities and Exchange Board of India (SEBI) to protect the interests of investors. All funds are registered with SEBI and complete transparency is enforced. .