MUTUAL FUNDS – DID YOU KNOW SERIES
#1 What is a Mutual Fund?
A Mutual Fund is an instrument that pools money from investors and invests it in various funds like equity, balanced fund, FoF, and bonds. Buying a mutual fund is like buying a small slice of a big cake.
#2 What is a sales price?
The price or Net Asset Value the investor is charged while investing in an open-ended scheme is called sales price. This may include a sales load.
#3 What is a repurchase/redemption price?
The price or NAV at which an open-ended scheme re-purchases or redeems its units from the investor is called Repurchase/redemption price. This may include exit load.
#4 What are the time-tested investment strategies that work?
Start early, drive slowly and reach safely is one of the best investing strategies. The single most important reason for you to start investing early is to make the most of the power of compounding. When you invest, every day is a day that your money is working for you.
Equity has historically outperformed every other asset class. Hence, if you have risk tolerance, it’s suggested to invest in stocks and equities. Hold it for long-term.
The next most important rule is to discipline your investment. Invest regularly. Last but not the least – diversify your investing portfolio. This will help you to reduce the risk and maximize the returns.
#5 What if a fund changes its strategy?
Think over whether the fund holds the same benefit as it was offering previously. If not, if its investment objective or approach alters, it might no longer fit your strategy. In such a scenario it’s suggested to switch over to a fund that suffices the requirement of your investing strategy.
#6 What if the fund consistently performs poorly?
If a fund’s poor performance persists than its peer group, consider replacing it.
#7 What is a Fund of Funds scheme?
Fund of Funds (FOF) is a scheme that invests in other mutual fund schemes. FoF scheme enables investors to diversify their investment portfolio through one scheme.
#8 What is an Asset Management Company?
Asset Management Company manages a mutual fund. AMC is an organized form of a money portfolio manager. It may have several mutual fund schemes.
#9 What is a load?
The load is a sales charge that some Asset Management Companies have on their funds (entry load and/or exit load) to compensate for distribution costs.
#10 What is an entry load?
At the time an investor purchases the units of a scheme an entry load is charged to the unit holder. At the time of allotment of units, the entry load percentage is added to the prevailing NAV.
#11 What is an exit load?
An exit load is charged at the time of redemption/transfer of an investment between schemes. At the time of redemption, the exit load percentage is deducted from the NAV.
#12 What is Net Asset Value (NAV)?
Net Asset Value (NAV) is the total asset value per unit of the fund. The Asset Management Company calculates NAV at the end of every business day. Net asset value reflects the realizable value that the investor will get for each unit if the scheme is liquidated on that date.
#13 What is a no-load fund?
No-load funds are funds that can be purchased without any sales charge.
#14 What is the difference between an open-ended and close-ended scheme?
Open-ended schemes can issue/redeem units any time during the lifespan of the scheme. On contrary, close-ended schemes cannot issue new units except in case of bonus or rights issue.
