What is Mutual Funds, How its work and What is benefits of it? Most people are afraid to hear mutual funds or other financial words like this. If you look at it closely, then there is no need to afraid of understanding the fundamentals of the mutual fund. So to explain this, it is important to give the basic answer that what is a mutual fund?
What is Mutual funds?
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 land 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 decided, 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.
How to invest in mutual funds?
You can either invest directly from a mutual fund or take the services of a mutual fund advisor. If you are investing directly, you will invest in the direct scheme of the Mutual Fund Scheme. If you are investing through a consultant or mediator, you will invest in the regular plan of this plan.
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