Basics of Mutual Fund, Opportunities of MF schemes and Learn types of MF investments. The amount deposited by a large number of investors is called a mutual fund, which is put into a fund. The fund manager uses his investment management skills to invest this money in various financial instruments. Mutual funds invest in many ways, which determines their risk and returns. When many investors invest in a fund together, the fund is divided into equal parts called unit.
For example, suppose some friends want to buy a piece of land together. The price of a piece of land of hundred square yards is one lakh rupees. Now if you divide this fund into units of ten rupees then 10,000 units will be formed. Investors can buy as many units as they wish, according to their investment capacity. If you have only one thousand rupees for investment then you can buy a hundred units. In the same proportion, you too became the owner of that investment (land).
Now suppose that the value of this one lakh investment has increased to one hundred and twenty thousand after one month. Now, according to this investment, the unit price will be calculated, then the unit of ten rupees has now become twelve rupees. The investor who bought a hundred units in one thousand rupees, according to the twelve rupees per unit, now his investment (100×12) has been Rs. 1200.
Based on the amount invested by you as an investor, how many units you own. Therefore, an investor can also be known as a unitholder.
With this, you can see that an investor who can not make big investments, has the facility of investing in small units. Apart from this, the biggest benefit of Mutual Fund MF is that an investor who does not have much information about the market leaves his investment in the hands of experts. These experts determine where, how and when to invest.
Mutual funds can be invested in many ways. To know more read here
Also, It is very important for you to understand what is NAV if you want to invest in a Mutual Fund