“Mutual Funds investing are subject to Market Risk, Please read all the documents carefully before Investing.“
I just thought, like all Mutual funds advertisement, it will be safe to mention it in my Blog as well (Just Kidding). Jokes apart, but more often we all had came across to above lines associated with the Mutual fund advertisement somewhere with a tiny font or a voice of person reading on television with a bullet speed.
As a extension to my previous article i.e. “Investmenia…“, this time i thought of exploring one of the Investment platform called as Mutual Funds, where even today people are reluctant to adopt it, probably due to incomplete information or fear of loosing their hard earned money. And like most of us up to some extent even I would not risk out my money blindly to any fund.
So without spending more time lets understand the concept of Mutual Funds through an interesting example:
Introducing Waseem: One of my good friend, little dumb at investing (hope he doesn’t beats me after reading this truth). Follows a common traditional or ancestral approach at investing, where a portion of his salary is saved in his saving account and after reaching a certain threshold that amount is booked under Fixed Deposit(FD).
Introducing Vinod: Another one of my friend, who keeps exploring and takes moderate risk to grow his money.
With high volatility in Share Market and managing a 9 to 6 Job subsequently becomes a tough job for Vinod to get better returns from the Share Market. Like Vinod, many of us are facing the same issue where it becomes really difficult to manage our returns effectively in our daily work schedule, and hence we choose to be like Waseem.
Under such situations, I personally suggest Mutual Funds are the option to be opt for. Basically a Mutual Fund is a group of experts who invest in Share Market on behalf of us and monitors the same. Their expertise level makes sure that we get the maximum out of our investment.
Every Fund has an objective which is mentioned in their document and based on that people like Vinod invest in that fund. Once the funds are operational, the value of the funds are calculated daily after the trading session (i.e. Asset Value of the fund which is nothing but Vinod’s and other investors money along with that day’s profit/loss). Based on this value, Net Asset Value(NAV) of the fund is decided for that day which is calculated after processing all the wages and expenses of the fund for that day on per unit.
To be more Clear I will put it as:
Vinod invested 5000 Rs, in Fund A @ 10 Rs./unit on 16/01/2015
That means Vinod now holds 500 units of Fund A, whereas “10 Rs.” is the NAV for Fund A on 16/01/2015
So in terms of returns, if we compare Both Vinod and Waseem:
Waseem invested 5000 and was able to gain around 6% annually on his Fixed deposit (After deducting Tax on the same)
And for the same time and duration
Vinod was able to gain around almost 11% annually by investing in Mutual Funds (Provided suitable Market conditions)
So I would personally suggest, lets come out of our own thoughts shell and take some risk and explore the world of Mutual funds.
In the next Article, will see modes of getting in to Mutual Funds…
Till then, Keep Reading…