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AnonymFeb 8, 2013

what are mutual funds?

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    Feb 8, 2013

    A mutual fund is a collective investment vehicle that pools money form different investors and inturn invest it in different asset classes like(shares bonds and money market instruments). the concept of mutual fund has become popular coz of the advantages it has got..like professional fund management, low costs(transaction costs), reduction in riskliquidity, conveniance and flexibility and most importantly Portfolio diversification.Broadly Mf's r divided into Open end funds n Closed end funds. Open-ended fund An open-ended fund is equitably divided into shares which vary in price in direct proportion to the variation in value of the funds net asset value. Each time money is invested, new shares or units are created to match the prevailing share price; each time shares are redeemed the assets sold match the prevailing share price. In this way there is no supply or demand created for shares and they remain a direct reflection of the underlying assets. At the fundamental level, there are three varieties of mutual funds: 1) Equity funds (stocks) 2) Fixed-income funds (bonds) 3) Money market funds Any body can invest in mutual funds whether you are salaried or a business man. there are different kinds of plans available to you to invest like one time investment and SIP's . Automatic Reinvestment plans(where the dividends you get will be automatically invested again), Systematic Withdrawl plans(important to realise the profits meaning ull be regularly getting the returns ) ELSS(Equity linked Savings scheme where there will be lock in period of 3 years and ull get the maximum tax benefit with good returns)

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