What is a Mutual Fund? How to choose a Good Mutual Fund?

What is a Mutual fund?

 Mutual Funds! There is such a way of investing in which you can earn good earnings if you invest money with a little bit more sense. As well as take advantage of tax saving But, since it is directly related to the investment in the Share Market, there is also some risk in this way of earning. If you carelessly used to avoid earning, your deposit-capital will not be too late to sink. However, if you understand its basics, then not only can this risk be minimized, but it can also be good earnings.


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In this post, we will give you basic information about the Tax-Free Mutual Fund In India so that you can make profits by doing the right strategy. We have tried to explain the concept of mutual- fund in easy language. As well as clarifying its categories of mutual fund and their types. At the end of the article, we have also told the method of choosing the Best Mutual -Fund.

Mutual Fund

In the Mutual- Funds, money is collected from us and a lot of people like you. The responsibility of managing this money is given to a fund manager. These fund managers are experts in investment matters. This manager tries to earn a maximum profit by investing in the share or bond. It is his attempt to raise more risk by raising less risk. In this way through a mutual- fund, a small investor can also take the services of the specialist.

The Following are the Most Popular Mutual Fund Companies

Asset Management Company

How to choose a Good Mutual -Fund

Many Mutual -Fund companies are operating in India. These Mutual -Fund companies are also known as Asset Management Companies or AMCs. AMC, in fact, is a registered company in SEBI, which makes a mutual -fund scheme and deposits money from people. The company also manages the fund manager.

Mutual fund schemes
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Mutual funds companies operate a large number of mutual -fund schemes. Everyone must choose the best Mutual Fund to Invest their money.Each scheme has different objectives of investment. Just like a single scheme puts money in stocks of big companies, Kotak Mahindra Mutual Fund, HDFC Bank mutual Fund, others will invest in small companies only. A third scheme can only put money in government bonds. In this way, every company starts several mutual -fund schemes with different objectives.

Fund manager

The responsibility of putting money in every scheme is given to any fund manager. One person can also be a fund manager of many schemes. A single mutual -fund company or asset management company has many fund managers. Apart from this, the company also has its own research team to work on an investment strategy.

New fund offer (NFO)
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These MF NAV Quote Mutual- Fund companies are launching new mutual- fund schemes from time to time. The launch of a new Mutual -Fund scheme in the market is called the new fund offer (NFO). Every new fund is given a name and its advertisement is promoted. Mutual- Fund companies also issue the NFO’s prospectus. This prospectus gives information about the purpose of the scheme, the details, and its fund management team.

Mutual fund unit

In the beginning, you can buy a unit of mutual -fund scheme for Rs 10. For the first time at the beginning of the investment, the unit costs only 10 rupees. This period with no change in price is called NFO period. In this period, the Mutual -Fund Company does not invest your money, i.e. does not apply to any stock. After finishing the NFO Period, your fund manager starts investing in pooled money. From here there is an increase or decrease in the value of this total investment, according to your unit’s price increases or decreases.

What is NAV

The value of a unit of a mutual-fund is called Net Asset Value (NAV). This Net Asset Value (NAV) only shows the performance of that mutual fund scheme.

Assume that you want to invest in a mutual- fund. You buy a unit of Mutual -Fund in NFO Period in 10 Rupees. The NAV of this Mutual Fund will be 10 rupees during the NFO Period. Now also assume that more than 9 people have bought the unit of the Mutual- Fund as you yourself have.

mutual -funds in India

 In this way, the mutual -fund scheme has collected 100 rupees by selling total 10 units. Now your fund manager purchases some of these Shares in these 100 rupees. Suppose, the value of your 100 rupees investment goes up to 150 rupees a year later. So now every unit of that mutual- fund has cost Rs.150 / 10 = 15 rupees That is, every unit has net asset value (NAV) of Rs 15.

Now assume that 5 more people want to invest in the same mutual- fund scheme. However, now the NAV of the unit of that mutual -fund scheme has been rupees 15. So they will have to pay 15 rupees for this one unit now. The company will be able to collect 75 rupees by selling 5 units of this new 5 units. Now the company has got total money 150 + 75 = 225 rupees. However, the total number of units was 15.

By issuing new units, a mutual- fund company can increase its corpus for investment. This does not affect the investment of older investors. Because these new units are available at new prices to new investors.

Mutual- Fund companies are announcing the NAV periodically. You can get information of any NAV through AMC’s websites or AMFI Portal.

Moreover, Information Visit Website: https://en.wikipedia.org/wiki/Mutual_fund

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