What are Mutual Funds?

How Mutual Fund Works?

As more and more people are realizing the benefits of investing they are tending towards the Stock market or Buying Mutual Funds. But most people do not know, what Mutual fund is and how does it work. So, today we are going to give you some idea about most ideal way of investing.

Before we start we should know, “Who and how one should invest?”

A person who has good understanding of Stock Market, know how to analyze company’s performance, Sale and Purchase of Shares, timing of market etc. can purchase shares directly in the market and invest. But we have few people who have this much of knowledge and time to do that. Most of us do not have time to read the charts and make decisions, but what about when someone does this for us all the time and make good investment on our behalf? Yes, there are people who do it through an investment instrument called “Mutual Funds”.

What is Mutual Fund?

In simple words, A Mutual Fund is a financial instrument in which many people pool their money and make a huge corpus. This money is then invested by fund managers, who are investment experts with good knowledge of Stock and financial market. So, investor does not need to spend his time to see the charts of the company and evaluate it, Fund managers do it on behalf of thousands of investors.

What is Mutual Fund NAV?

As there are "shares" as units in a company, Mutual Funds units, have Net Asset Value also called MF NAV. NAV grows over a period of time as investment grows with almost same ratio. There are some costs like administrative and other costs also but that is very low. 

Is MF Investment Safe?

It is very safe, but has the market risks so I would suggest comparing different MFs and their performances, over a period of time and invest.