What are Mutual Funds?
What are Mutual Funds?
What they are and how they can make you money
The brain-child of Wall Street, mutual funds are perhaps the easiest and least stressful way to invest in the market. In fact, more new money has been introduced into funds during the past few years than ever before - leaving the managers scrambling for new investment ideas.
Before you jump in the pool and select a Mutual Fund to invest through, you should know exactly what they are and how they work.
What is a mutual fund?
Put simply, a mutual fund is a group of individual people, companies, and other organizations who pool their money together to invest. A "Fund Manager" is hired and paid to invest the cash that the investors have raised. The goal of these managers is to beat the Sensex or the Nifty in a fiscal year.
What are the benefits of investing through a mutual fund?
Mutual funds are actively managed by a professional money manager who constantly monitors the stocks and bonds in the fund's portfolio. Because this is his or her only job, they can devote considerably more time to financial planning than you as an individual investor ever could. This allows the peace of mind that comes with informed investing without the stress of analyzing your positions yourself. In other words: You don't have to worry about picking stocks and bonds. In theory, you just keep investing in the fund and let the manager choose which companies to buy and which companies to sell.
How do I know which fund to select?
Most funds have a particular strategy they focus on when investing. For instance, some invest only in Blue Chip companies that are more established and are relatively low risk. On the other hand, some focus on high-risk start up companies that have the potential for double and triple digit growth. Finding a mutual fund that fits your investment criteria and style is absolutely vital - if you don't know anything about biotechnology, you probably have no business investing in a biotech fund.
After you've decided which type of fund you want to invest in, it is time you look at their rankings. Funds are ranked based upon their performance as a whole and performance against their peers. A general rule of thumb is the higher the rank, the higher the quality of the fund you are investing in.
How do I begin investing in a fund?
You can visit the fund's web page or call them and request information and an application. Most funds have a minimum initial investment which can range anywhere from Rs. 1,000 – Rs. 1,00,00,000+ with most in the Rs. 1,000 – Rs. 5,000 range. Once you have an account (folio) open with a Fund, you can send checks to it and they will purchase additional units for you.
© N.M. Finserv ---- www.nmcomp.com/finserv
December 2004
What they are and how they can make you money
The brain-child of Wall Street, mutual funds are perhaps the easiest and least stressful way to invest in the market. In fact, more new money has been introduced into funds during the past few years than ever before - leaving the managers scrambling for new investment ideas.
Before you jump in the pool and select a Mutual Fund to invest through, you should know exactly what they are and how they work.
What is a mutual fund?
Put simply, a mutual fund is a group of individual people, companies, and other organizations who pool their money together to invest. A "Fund Manager" is hired and paid to invest the cash that the investors have raised. The goal of these managers is to beat the Sensex or the Nifty in a fiscal year.
What are the benefits of investing through a mutual fund?
Mutual funds are actively managed by a professional money manager who constantly monitors the stocks and bonds in the fund's portfolio. Because this is his or her only job, they can devote considerably more time to financial planning than you as an individual investor ever could. This allows the peace of mind that comes with informed investing without the stress of analyzing your positions yourself. In other words: You don't have to worry about picking stocks and bonds. In theory, you just keep investing in the fund and let the manager choose which companies to buy and which companies to sell.
How do I know which fund to select?
Most funds have a particular strategy they focus on when investing. For instance, some invest only in Blue Chip companies that are more established and are relatively low risk. On the other hand, some focus on high-risk start up companies that have the potential for double and triple digit growth. Finding a mutual fund that fits your investment criteria and style is absolutely vital - if you don't know anything about biotechnology, you probably have no business investing in a biotech fund.
After you've decided which type of fund you want to invest in, it is time you look at their rankings. Funds are ranked based upon their performance as a whole and performance against their peers. A general rule of thumb is the higher the rank, the higher the quality of the fund you are investing in.
How do I begin investing in a fund?
You can visit the fund's web page or call them and request information and an application. Most funds have a minimum initial investment which can range anywhere from Rs. 1,000 – Rs. 1,00,00,000+ with most in the Rs. 1,000 – Rs. 5,000 range. Once you have an account (folio) open with a Fund, you can send checks to it and they will purchase additional units for you.
© N.M. Finserv ---- www.nmcomp.com/finserv
December 2004
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