Investing in Mutual Fund Products by Investors Explained
Discover the world of mutual fund, a popular investment product that pools money from retail investors, high net-worth individuals (HNIs), NRIs, and institutions. Learn how these funds invest in diverse assets like stocks, bonds, gold, real estate, and more.
FINANCE & ECONOMICS
Describing Mutual Fund
Mutual Fund is an investment product pools money from different Investors:
1.Retail Investors 2. HNIs (High Net- Worth Individuals ) 3.NRIs 4. Institutions
and invest that money in variety of Assets:
1.Stocks (equity) 2. Bonds (debt) 3. Gold 4. Real Estate.
We don’t buy the shares ourselves but the fund managers on behalf of mutual fund companies buy them for us and in return provide us a unit of the fund called NAV which already includes a mix of various investments from different investors like us.
Describing Net Asset Value (NAV)
NAV = [ Total Assets of the funds - Total Liabilities] / [ Total no of Units ]
Total Assets = Value of (Shares+ Bonds + Gold ETF + Real Estate and more) the fund holds
Total Liabilities = Expenses + Management fees
Total No of Units = Total Units of the investors in Mutual Fund
Fund managers then manage them professionally for us. The value of our investment is measured in NAV (Net Asset Value). We gain if the fund performs well and we can redeem or withdraw except for locked in funds.
Who are the Investors?
There can be four types of investors
1. Retail Investors: They are the ordinary people like salaried individuals, small business owners who can invest in small amounts through SIPS or in bulk amount.
2. HNIs (High Net- Worth Individuals): Wealthy people investing larger amount
3. NRIs: Non -resident Indians investing in Indian Mutual Funds.
4. Institutions: Companies, trusts, banks, or pension funds investing for financial return.
Who Manages Mutual Funds for Investors?
Mutual Funds are managed by professionals called Fund Managers. They are qualified investment experts responsible for managing mutual fund portfolio.
Their role:
a. They decide what to buy, when to buy and how much to invest in each asset like stock, bond, gold or combination.
b. They analyze economy, industry trends, specific companies and also study risk and opportunities before investing.
c. They continuously update the portfolio subject to market changes, performance and investors redemptions.
d. They also diversify investment to reduce risk and ensure compliance with SEBI regulations.
e. They provide reports and data to investors.
