Mutual Funds:What, How,Why???

Today when we hear about this term Mutual Fund we definitely think what it is and if know it then we have many other queries related to that so let us discuss about it.

What is a Mutual Fund?

Mutual Fund is a type of fund where a huge lump of money is pooled from various persons/investors from different parts of country by a trust/company and are collectively invested and managed in capital market (such as equity, debentures etc) by professionals or skilled individuals associated with this industry. In case of profit or loss being made by the company it is equally beard by the individuals equally according to the contribution made by them. Advantage of this for all those who are interested in capital market is that they can invest in a diversified, professionally managed basket of securities at a relatively low cost and low risk and the Disadvantage is that this a completely dependent on Stock Market so is full of risk i.e one may make huge profit and loss as well.

Which companies are there in India to invest in Mutual fund?

There are many companies in India which are associated with this industry, in fact, nearly every company dealing with finance has its mutual fund company:

1. Reliance Mutual Fund

2. ICICI Mutual Fund

3. Birla Sunlife Mutual Fund

4. UTI Mutual Fund

5. Shriram Mutual Fund

6. HDFC Mutual Fund

7. SBI Mutual Fund

8. Kotak Mutual Fund

9. Tata Mutual Fund and so on....

What is the difference between investment through Mutual Fund investment and directly investing in stock market by our own?

Actually there is no difference here the money is invested by professionals who have good knowledge of this and they keenly watch the market activities and buy and sell accordingly and they know what is the best time to invest where but the profit which we get as return is less as compared to when we invest directly because the wages of employees, other costs and company's profit are take from that only but when we invest by our self we should have proper knowledge about the company's profile and the current market scenario or else individual can lose their money in market or money will be blocked for longer period and will be of no use risk of losing is very high as compared to mutual fund investment. Where as we can get other benefits like insurance and tax saving plan from mutual fund company according to their scheme if any.  

How a Mutual Fund company work?

Company's through their recruited agents/advisor collect money and give it to a fund manager (professional/skilled employee) to invest in capital market which generates some return after sometime and is then given back to investor accordingly till the date the investor keep his money with that company.

How to become a advisor for the company?

For becoming a advisor/agent or make carrier with this industry firstly you have to clear a basic exam of NSE-India i.e AMFI (Association of Mutual Fund in India) and after getting certified you may consult associated companies or they will consult you after sometime. This is need to be certified because one should have prior knowledge of what it is all about.

What is NAV?

NAV is also known as Net Asset Value i.e The value of all the assets minus the liabilities and this is the thing which we get after investment in a mutual fund company i.e NAV per unit alloted to us. For example if we invest RS 2000 and NAV is Rs 20 then we will be allotted 100 units and NAV changes from time to time according to capital market up and down so the next value will be NAV value * No. of unit allotted.

Why to invest in Mutual Fund?

The answer is very simple to grow your money at some risk and some safety having some additional benefit and without tension of money management.