In the modern world
of finance, there are many tools available that can help one to invest the
amount and earn a good return on them. No doubt each of them has certain
benefits as well as limitations and hence one needs to decide prudently where
he wants to invest. In the present scenario, the mutual fund is considered as a
very good option for lower to the middle-class person who wants to save some
amount every year and earn a good return on it so that after a certain period
he can have the desired amount in his hand. Hence it also helps one to achieve
his short as well as long term financial goals.
The terminology:
In the market of
mutual fund, there are certain terms used which an investor must know and
understand. Here are a few of them.
·
Unit:
The unit is a part of the total stake which is given to the investor in return
to a certain amount invested in the concerned fund. Every unit has a price. For
example, if the unit price is 150 and one invests 600, he will be given 4 units
of the fund.
·
The
NAV: NAV is a short form of net asset value. It is an important term as on the
basis of the NAV only one can know how much amount he can have if the units are
redeemed or how many units he can get for the specific amount invested in the
fund. The NAV formula
is very simple where the net asset is divided by the total number of units with
the fund manager.
·
The
fund manager: Fund manager is the person who is provided with the duty to
manage the fund of the concerned scheme. He has to manage the fund and monitor
the same when invested in the market. In case of any risks, he can move the
fund from one sector to another or one company to another. There is also a fund
management charge levied on each investor for his services.
The advantages:
The advantages of investing in mutual fund only attract
investors.
·
Easy
to invest: The process of investment in a direct mutual fund appis much easy. One needs to fill a
form and pay the amount. There are also offline and online options available
for investors from different segments.
·
Transparency:
Other markets such as investment in gold or land as well as stocks are little
complicated to understand for a common man which is not the case with the
investment in mutual fund. One can have a clear idea about his investment,
value and amount to get if he redeems the units.
·
Wide
options: There are lots of options available in the market which can help the
investor to invest the specific amount in a specific sector. There are small
caps, mid caps and large caps available in the market where the fund manager
invests the amount and the investor can have its benefits. Hence it becomes
easy for the investor to have good benefits at less risk.
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