ALL ABOUT MUTUAL FUND 2

HOW MUTUAL FUNDS WORK ? A mutual fund owns a portfolio of investments funded by all the investors who have purchased shares in the fund. So, when an individual buys shares in a mutual fund, they gain part-ownership of all the underlying assets the fund owns. The fund's performance depends on how its collective assets are doing. When these assets increase in value, so does the value of the fund's shares. Conversely, when the assets decrease in value, so does the value of the shares. How Are Earnings Calculated for Mutual Funds? Investors typically earn returns from a mutual fund in three ways: Dividend/interest income: Mutual funds distribute the dividends on stocks and interest on bonds held in its portfolio. Funds often give investors the choice of either receiving a check for distributions or reinvesting earnings for additional shares in the mutual fund. Portfolio distributions: If the fund sells securities that have increased in price, the fund realizes a capital gain, which most funds also pass on to investors in a distribution. Capital gains: When the fund's shares increase in price, you can sell your mutual fund shares for a profit in the market.

ALL ABOUT MUTUAL FUNDS 1

MUTUAL FUND MONEY COLLECTED FROM VARIOUS INVESTORS, POOLED TO BUY SHARES FOR LONG TERM AND SHARE TRANSACTIONS IN THE SHORT TERM. The profit is shared as Dividends. Growth schems do not distribute dividends and they accumulate. Initially to enter a Mutual Fund, you have to invest min. Rs.5000 or you can start investing Rs.1000/- for a minimum of five months When a new scheme, plan is launched it is called NPO. Normally the face value (cost per unit/share) is Rs.10/- You invest Rs.10000/- in NPO. You are allotted 1000 units with a facevalue of Rs.10/- That plan makes a profit of 10 % in one month. Then the value goes up by Rs.1000 and now stands at Rs.11000/-. Then the value (Net Asset\ Value) is increased by 10 %. That means your plan NAV becomes now Rs.11/-. You can enter the existing scheme, plan. But you have to buy at the NAV prices, not at Rs.10 or face value.