What is Mutual Fund.

 What Is Mutual Fund

Mutual fund is a fund where money is collected by general public and it is invested in share market. Compony which collect funds from public is called Asset Management Compony(AMC).

There is a fund Manager for every Mutual fund, who invests the collected fund to the stock market and gets profit. This profit is then distributed to Investors. 

The AMU which manages the fund charges some fees for their service. It is called Expense ratio.

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There are so many Mutual Fund companies available in the marked, such as ICICI Mutual fund, SBI Mutual Fund, Kotak Mahindra Mutual Fund, Birla Sun Life Mutual Fund and so on.

 

And there so many schemes of every Mutual Fund. There are Large cap fund, Mid cap fund, Small cap fund, Hybrid fund, ELSS fund, Sector fund etc.

Your money in Mutual Fund is generally invested either in Debt or in Equity.

 

In Debt Fund ,your money is invested in Government securities, Treasury Bills and Debentures.

 

Government issues this instruments to the public to raise fund and gives interest on it.

 

In equity fund your money is invested in The Stock Market. There are so many Equity Mutual Fund also.

What Is An AMC.

Every AMC is managed  by a professional Fund Manager. He decides to invest or disinvest in a particular stocks. 

The performance of every Mutual fund depends on its Fund Manager skills. 

So, before investing in a Mutual Fund one must see the past performance of that Fund Manager.

You can invest in Mutual Fund either by Lump Sum amount or by SIP. 

In SIP you invest in monthly basis. You can open an SIP account by as minimum as 500 rupees per month. 

This account can be opened in any bank with auto Debit facility. Every month on a fixed date your Investment Amount is cut and sent to your AMU, and then you get no. of units. Every Mutual Fund Scheme has a value of its one unit. It is called NAV of that scheme. If you invest 1000 rupees in a mutual fund scheme which NAV is 20 rupees, then you get 50 units of that scheme. After one year if NAV of that scheme is increased to 24 rupees. Your profit will be 200 rupees.