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What is Mutual Fund?

A mutual fund is a professionally managed investment scheme. It is run by an asset management company (AMC) which acts like a mediator for the retail investors. The AMC pools in money from a large number of investors and invests it in equity shares, bonds, money market instruments and other types of securities.
Buying a mutual fund is like buying a small slice of a big pizza. Each investor, in return, is assigned a specific number of units proportionate to his invested amount in the fund. The investor is known as the unitholder.
The unitholder shares the gains, losses, income and expenses of the fund in proportion to his investment in the fund.

How mutual funds works?

Each mutual scheme is managed by a fund manager. He frames the investment strategies based on the investment objectives of the fund. The fund manager tracks the fund portfolio on a daily basis and decides when to buy/sell the shares of the underlying asset class.

As a mutual fund investor, your mutual fund units depict your part of holdings in a specific scheme. These units are valued at Net Asset Value (NAV) which is determined at the end of every day.

The NAV keeps fluctuating according to changes in the prices of fund’s holdings. A unitholder can purchase or redeem the units as per the prevailing NAV. He participates proportionally in the gain or loss of the fund.

SEBI is the regulator of all the mutual funds in India. It formulates the fund provisions keeping the interests of the investor in mind.

How to invest in MFs?

There are many avenues available nowadays from where you can buy mutual fund units.

  • Direct Plans: You can approach the asset management company (AMC) and invest in direct plan of your choice. These plans have low expense ratio because they don’t charge distributor commission. Hence, you can earn a better rate of return.

  • MF Distributor: You can contact a registered mutual fund distributor. He will help you out to complete the required documentation. You will be investing in a regular plan which will charge a distributor’s commission.

  • Online: There are a number of third party portals available online. You can visit one of them and invest in a variety of mutual funds by paying a nominal fee.

Nature of investment ( SIP / Lump sum )

There are basically two ways of investing money in your favourite mutual funds. You can go via the SIP or the lump sum route.

  • Lump sum investment: Under a lump sum, you invest one big chunk of your funds in mutual fund scheme of your choice. It generally happens when you receive huge corpus from say sale of an asset or retirement benefits. But investing a lump sum involves greater risk. That’s why, it is always recommended to go via the SIP route.

  • Systematic Investment Plan (SIP): Under an SIP, you instruct the bank to deduct a fixed sum from your savings account every month and invest it in the said mutual fund scheme. In this way, you can buy units continuously without worrying about the right time to enter the market. You get the benefit of rupee cost averaging and enjoy power of compounding.

How does a mutual fund calculator work?

Is your mutual fund scheme generating returns in line with your expectation?

Are you wondering what amount of SIP would help you in personal goal accomplishment?

Get your answers by using our Mutual Fund Calculator!

The Mutual Fund Calculator will give you the investment value at maturity by calculating fund returns according to your investment horizon. You can adjust the variables of the calculator like SIP/lump sum, amount of investment, frequency of SIP, expected rate or return and duration of SIP.