If you want a healthy financial future and economic freedom, then the investment should become a habit for every person. You can continue your investment journey by investing through mutual funds if you are someone who is deprived of investing due to a lack of knowledge or any other reason. If you start early (in your 20s) and invest for a long time (20 + years), you can become a million (not guaranteed) until you retire.
A mutual fund is a type of investment product where many investors are depositing their money to invest in stocks, bonds, etc. A mutual fund is managed by a highly-skilled, experienced portfolio/fund manager in the art of investing.
The main objective of a mutual fund is to generate revenue for its investors. Therefore, mutual funds should maintain the investment targets set in their prospectus.
Characteristics of mutual funds
Net asset value- Net asset value is the value of mutual funds per unit at a given date and time. That is the price you pay to buy a unit of a mutual fund. , you can think of NAV as a stock price. If the NAV increases, you will be benefited if the NAV goes down, you will be at a loss.
NAV = (Assets – Liabilities) / No. of shares outstanding
Units
Units of mutual funds refer to the number of shares of mutual funds that you can buy. You can buy units of mutual funds in your current NAV.
Highly-skilled specialist manager
A highly-skilled expert manager manages mutual funds. The goal of an investment/fund manager is to create a stock and bond portfolio to achieve the highest returns of investors. Such experienced fund managers are typically MBAs or CFAs and have strong financial and investment expertise.
Holdings
Holdings refer to shares and bonds of mutual funds. It applies to shares of companies that are purchased from mutual funds. Such holdings can range from 10 to 50 to 100 or more.
The expense ratio
The expense ratio applies to the annual fee for managing the funds that you need to pay for the fund house. The expense ratio covers the operating cost of the fund and the fund manager’s fees. The total rate charged by the fund house for equity-oriented investment is 2.5 percent. For example, if your fund has returned 15% in a year and the expense ratio is 2%, then the actual return would be 13% (15% –2% = 13%).
Exit load
An exit load is a type of fee that will be levied on an investor if he withdraws money prematurely. If you withdraw money within a year, some mutual funds charge the exit load, others that charge in a different way.
Conclusion: Mutual funds are one of the best start-up investment products. Mutual funds are highly diversified and allow you to choose the type of fund you wish to invest based on your investment goals. Where you put your money, you have the power to control. Mutual funds are also accessible, well managed and inexpensive to understand. These are professionally managed by a highly qualified portfolio/fund manager, whose only job is to invest your money in the right securities to generate revenue for you.
