What is Mutual Fund

Just as investors invest in any other type of investments, such as fixed deposits, recurring deposits (RD), Post office deposits and hope to make a profit on it after a certain time.

Also, Mutual Fund Investment is also an excellent medium of investment where investors can earn better returns by investing.

“Mutual Fund is a less risky option with more profit”

What is Mutual Funds?

Mutual fund is made with two words – Mutual and fund

Mutual means – mutual, mixed, mutual bonding,

fund means – money (money collected together).

In this way Mutual Fund means – a lot of people were gathered together to invest money.

Mutual Funds managed by a Fund Manager who has experience in financial markets.

In this way, the money deposited from different investors is invested in stock market and government or corporate bonds, etc. according to the objective and condition already stated in that mutual fund.

In other words, “Mutual fund is an INVESTMENT system in which a huge FUND is prepared by mixing together the money of many people and Managed by Fund Manager.

How Mutual Funds works –

Mutual Fund is a Unit Investment System

Mutual fund is a system of investment in which money is deposited, deposited from different investors, and units are given to the investors in exchange for the money deposited,

Mutual Fund Unit & Mutual Fund Unit Holder:

Mutual fund investor is called a unit holder.

A unit given to a mutual fund investor has a price, also known as a mutual fund unit price,

And this unit price changes daily, which tells the profit or loss to the investor in the mutual fund,

NFO- New Fund Offer

Any mutual fund scheme, when the offer that is brought to the public to invest in the scheme for the first time, is called New Fund Offer.

In NFO, investors are offered Unit of Mutual Fund for a fixed Price.

For example, if TATA brings a mutual fund scheme, then KIM (Key Information), SID (Scheme Offer Document) and leaflets can be seen on its website, Where all information related to the offer is available,

NFO also has a minimum investment Amount, like 5000, or 10000 rupees,

And the NFO opens for a few days, and then becomes CLOSE,

Once the NFO is CLOSE, suppose

The company collected Rs 10 crore from NFO, and had a unit PRICE of Rs 10,

So in this way there are total units, 1 crore,

And if I put 50000 rupees in NFO, then I will get 5000 units,

Let’s assume profits are 15 % and consider one year.

Now total profit for one year will be 1.5 crore. The profits divided by no. of shares.

After calculation we got 1.5 RS Profit for each share.

Now you have 5000 shares ,then total profits = 1.5 x 5000= 7500 RS.

You have to remember the below point for investing in Mutual Funds.

  1. First you have to check shariah compliance Mutual Funds.
  2. In India there are only few funds which are shariah compliant and they will show shariah certificates.
  3. Needs patience to hold for a long time ,Minimum 10 years for good results.
  4. The Best way to invest in Mutual Funds through SIP (Systematic investment plan).
  5. Invest in Mutual Funds through Direct Plan, not Regular Plan.
  6. In Mutual funds you can create more money due to Power of Compounding. Compounding works only for long terms.
  7. Mutual Funds Needs regular investments.
  8. You can start with a minimum 5000 RS for the first time and after this multiple of 100 will be okay.
  9. You have to diversify your monthly investment in at least 3 funds.
  10. You can invest in Lump Sum amounts also.

I hope you will learn and understand about the Mutual Funds. This is based on my research for educational purposes.

Wishing you best for your investment Journey. Jaza kallah Khair.

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