What is the first thing that comes to your mind when someone mentions mutual fund. It’s boring and complicated, but is it? Let’s find out. Let’s see how a mutual fund operates. Investors  like us pool in money to help form a mutual fund. An Asset Management Company (AMC) is appointed to manage the mutual fund and achieve the desired goals.

Who are AMCs?

The AMC has professionals who understand how markets and money work, and then there are trustees of mutual funds who keep monitoring the AMC’s activities to ensure that investors interests are protected. The AMCs take your money and invest in stocks and fixed income investments.

What’s the difference the AMCs make?

Now, it’s a given that stock and bond markets have ups and downs. There is no escape from that fact. To reduce this risk, the AMC does a very smart thing. For equity investments, they invest your money in not one but several industries such as FMCG, steel, pharma, power, and IT. This ensures that even if one stock doesn’t perform well, the better performing stocks, balance the dip.

For debt investment, AMCs invest in various securities to spread the risk. Debt fund when teamed with equity investments in diverse industries, make for a great investment combo. It has the growth of equity investments and the stability of debt funds. All these factors make mutual fund investment less risky and more beneficial than a common man investing directly in equity and debt.

What happens to your money after you invest in a mutual fund?

Now, let’s see what happens after you invest in mutual funds. Once your money is invested in a mutual fund, you are then given units, which represents money invested by you in the mutual funds. These units are easily redeemable to get back your money, and they are generally mentioned along with the NAV. You may have come across this term NAV or net asset value. The NAV of a mutual fund represents one unit’s value of your investment after all fund expenses and management fees are paid. Whenever you feel like checking the market value of your investment, you simply need to multiply your Mutual Fund’s given NAV by the number of units you hold in that mutual fund.

How can you invest in a mutual fund?

You can invest your money in a mutual fund in a lump-sum manner or through smaller bits called a systematic investment plan, popularly known as SIP. This makes mutual funds accessible for anyone. You may be a salaried employee, an entrepreneur, or businessman, anyone can invest in a mutual fund.

How do you track your mutual fund investment’s performance?

How do you know that your Mutual Fund investments are doing well or not?Every Mutual Fund has a fixed benchmark to measure their performance. This benchmark could be part of the Nifty or Sensex. To judge the performance of your Mutual Fund, you need to check how the Mutual Fund has performed against the benchmark set for its measurement.

What’s the fund manager’s task?

The fund manager’s task is to analyse the market and cross the set benchmark of the fund. This is exactly why the fund managers are paid. While investing, it’s important to know about the fund manager of the given fund.

What are the key benefits of a mutual fund?

Mutual funds can offer many key benefits such as diversification, liquidity, professional management, low charges, and much more.

To invest in mutual funds or to get more information on the best fund options, write us at [email protected]

Mutual fund investments are subject to market risks. Please read the offer document carefully before investing.