Finsac Capital is a complete guide to mutual funds
Mutual Funds
A type of financial vehicle whose goal is to pool money collected from numerous investors so one can invest in securities like bonds, stocks, money markets, and other assets, is known as a mutual fund. Professional money managers operate mutual funds and they allocate the fund’s assets while attempting to produce capital gains as well as income for the fund’s investors. A mutual fund’s portfolio is structured and maintained so that one can match the investment objected as stated in its prospectus.
A mutual fund enables a small or individual investor to access portfolios in bonds, equities, or other securities that are professionally managed. Every shareholder, hence, participates proportionally in the losses or the gains of a mutual fund. Mutual funds also invest in a vast number of securities with their performance usually being tracked as the change in the total market capitalization of the fund. It is derived by putting together an aggregate of the performance of any underlying investments.
Evaluate the performance of a mutual fund
Rebalancing ensures the portfolio earns a good return while maintaining the risk level. It involves reallocating funds to have the right asset mix. Evaluate fund performance based on the following parameters.
Types Of Mutual Funds
How To Select The Best Mutual Funds?
Before investing in any fund.
Identify your objectives and eventually decide the risk you want to undertake. Considering the personal risk tolerance level will help you determine the balance between risk and return from the investment.
Open Mutual Funds By Finsec-Capital
Investing in Mutual Funds
Involve fees, called a load. It is a percentage of the fund invested. SEBI has regulated the upper limit at 2.5 percent. It is the higher percentage that asset management companies can charge. Before investing in any scheme, get a clearer idea of all fees and expenses involved in it. The MF collects a front-end load when the investor buys the units and a back-end load when they sell the units.
As with all investment
Performance is a critical measure to decide the viability of MF investment. Before investing in mutual funds, compare performance, risk-return, tax implications, and the current market, impacting its return.Sometimes we only concentrate on past performance before investing, but history doesn’t always repeat in the stock market. Hence, one needs to determine if the stock is poised to perform in the future.
What are closed-ended funds?
A closed-end mutual fund, “closed-end fund” or “closed-end investment” is a debt or equity fund comprising of a pool of assets that are issued in a predetermined number of units during its launch. This offer is called a new fund offer (NFO) and investors cannot buy or sell units once it is closed.While the NAV of the closed-end fund is calculated regularly, in effect, its price depends on the demand and supply of its units.
Closed-end funds are not illiquid
While on the surface closed-end funds may seem to be highly illiquid, they are, in effect, not. It may seem that once you purchase a unit of a closed-end fund, you will be stuck with it, but stock exchanges actually offer many opportunities to buy or sell the units at existing market prices. Investment in illiquid securities like emerging-market stocks is high-risk.
Types of Mututal Funds Returns
Absolute Returns
Such returns refer to the amount by which a mutual fund scheme has changed at the time of its redemption. Take, for instance, A who invests ₹1 lakh in a fund scheme at the beginning of 2016. In Jan of 2016, the mutual fund scheme’s value was ₹1.25 lakhs.
Annualised Return
These types of returns refer to those that are earned by one’s mutual fund on a yearly basis. Annualized returns operate with the assumption that one’s mutual fund has grown at a constant rate, although this is often not the case.
Compounded Annual Growth Rate (CAGR)
A third means of assessing mutual funds returns is CAGR or compounded annual growth rate. CAGR gives us the growth of a certain investment over a certain time period. CAGR also takes into account the interest that is earned on one’s principal investment as well as any that is accrued on the interest itself.
