Important information related to mutual funds-
Know all this information about
Contents
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- what is mutual fund,
- how it works
- what are its benefits
- what are its benefits?
- What are units called,
- how one can invest in mutual funds
- how it is considered a safer investment than investing directly in the stock market.
- what is mutual fund,
- how it works
- what are its benefits
- what are its benefits?
- What are units called,
- how one can invest in mutual funds
- how it is considered a safer investment than investing directly in the stock market.
If you look at it closely, there is really not much to be afraid of to understand the fundamentals of mutual funds. Therefore, to understand it, it is necessary to answer a basic question that what is a mutual fund?
What is Mutual Fund-
The amount of money deposited by a large number of investors is called mutual fund which is put in one fund. The fund manager uses his investment management skills to invest this money in various financial instruments. Mutual Funds invest in a variety of ways, which determine their risk and return.
What is the unit-
When many investors together invest in a fund, then the fund is divided into equal parts, which is called unit or unit unit.
Example-
Suppose some friends want to buy a piece of land together. The cost of a piece of land of 100 square yards is one lakh rupees. Now if we divide this fund into units of Rs 10, then 10,000 units will be made. Investors can buy as many units as they want according to their investment capacity. If you have only 1000 rupees to invest then you can buy 100 units. In the same proportion, you also become the owner of that investment (land).
Now suppose that the value of this investment of one lakh increases to Rs. 1,20,000 after a month. Now according to this investment, the price of the unit will be calculated, then the unit of ten rupees has now become twelve rupees. The investor who had bought hundred units for one thousand rupees, now his investment (100X12) has become 1200 rupees at the rate of twelve rupees per unit.
The amount you invest as an investor is based on the number of units you own. Therefore, an investor can also be known as a unit holder. Out of this, the increase in the value of investment along with other income earned is distributed to the investors/unit holders in proportion to the number of units after deducting applicable expenses, encumbrances and taxes.
Benefits of mutual funds-
From this you can see that an investor who is unable to make a big investment, has the facility to invest in small units.
Apart from this, the biggest advantage of Mutual Fund Mutual Fund is that an investor who does not have much knowledge of the market leaves his investment in the hands of experts.
Where, how and when to invest is what experts decide. Along with knowing the benefits, it is also advisable to know the risk involved in investing in mutual funds.
Where to invest with mutual funds
Mutual funds invest in many ways. The most prominent are the bond and stock markets. Apart from this, you can invest in gold or any other commodity. There are several types of funds which are known according to their investments. The main ones are debt, equity and balanced funds. The most diversification is found in equity funds.
Why is it the choice of investors-
In recent times, mutual funds have emerged as an investment tax option very quickly and more and more people are investing in them. The main reason for this is that investing in mutual funds is easy and investing in mutual funds through SIP is becoming the choice of more and more people.
Mutual funds are a very good option to invest in where the interest in banks is decreasing. If invested for a long time, it can become a way to get the highest return on investment.
