What Are Mutual Funds And How Does It Work


How does a mutual fund work what comes to our mind when someone mentions in virtual fund boring complicated not actually.
What Are Mutual Funds And How Does It Work

Let us explain how a mutual fund works okay this is how it works investors like us pull in money to form a mutual fund an asset management company or AMC is appointed to manage the money according to various goals the AMC has professional people who understand how markets and money work and then there are trustees of mutual fund who keep monitoring the AMC's activities to ensure that investors interests are protected the AMC's take your money and invest in stocks and fixed income investments now it's a given that stock markets and bond markets have ups and downs there is no escape from that fact to reduce this risk the asset management company does a very smart thing for equity investments they go and invest in not one but several industries this ensures that even if one stock doesn't perform well the better performing
stocks balance the dip for debt
investments they invest in various
securities to spread the risk debt funds.
when teamed with equity investment in
diverse industries make for a great
investment combo it has the growth of
equity investment and stability of debt
funds all these factors make mutual fund
investments less risky than a common man
investing in equity and debt directly
and more beneficial okay what happens
after you invest in mutual funds once
your money is invested in a mutual fund
you are then given units which represent
the money invested in the fund these
units are easily redeemable to get back
your money and they are generally
mentioned along with the nav you must
have come across this term
a navy or net asset value of a mutual
fund represents the value of one unit of
your investment after all fund expenses
and management fees are paid so whenever
you feel like checking the market value
of your investment you simply need to
multiply the given nav by the number of
units you hold you can invest in a
mutual fund in a lump sum manner or in
smaller bits through a systematic
investment plan called SIP this makes
mutual funds accessible for anyone
salaried entrepreneurs businessmen
anyone you can know more about 
advantages of SIP so is
your investment doing well not so well
how do you know you see every fund has a
fixed benchmark to measure their
performance this benchmark could be part
of the Nifty or sense X to judge the
performance of your fund you need to
check how the fund is performed against
the benchmark set for its measurement
the fund managers task is to analyze the
market and cross the set benchmark of the fund this is exactly why we pay fund managers.

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