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​Mutual Funds and NAV- a little know how​

Summary: Mutual funds in India are catching up popularity and with more knowledge are becoming an important part of the investment of its people. Yes, it has risk involved, but then a gain without a risk is impossible. So, a quick know how is important to clearly understand what are mutual funds, the different types of mutual funds and what is NAV? And if still you are not sure of managing your funds on your own, rely on you fund manager or contact a trusted Asset Management Company.

Mutual Funds in India have gained much popularity in last few couple of years, however for some it still is a complicated concept to understand and a risky one to invest. But as they say: 'No Risk, No Gain'. So, yes! There is some amount of risk involved, but then what is the other alternative to keep safe that extra money and why not do something to grow it? And yet again, if you are a big shot taking home hefty amount of pay back home, how do you save tax? Also, you are not the one who would go for FDs only. The answer to all of it is investment in mutual funds. But before you do that, you must understand the basics of it. So, in order to simplify it, let’s assume you are a group of 5 friends, each wish to park some amount of money into investment. You have an objective set for your fund and want to ascertain that your fund grows in next 3 years or more to up to certain percentage say. The amount each of you wishes to pool in is different, but then none of you know what the best way to put it to use is.

So, to sort the whole thing, firstly, this your pool of funds is what is called mutual funds and in order to invest the same, a professional called the mutual fund manager will come into picture. He/she with their sound knowledge of the market value of securities builds a portfolio of investments in line with the objective of the scheme. Now, with all the funds gathered so far, it would be insane to put all of it to just one sector. So, after assessing the latest trends your fund manager will park your funds into different sectors, say IT, Infra, Telecom, Healthcare, etc. to name a few. This would help ensure that the risks involved are regulated, because not all sectors or stocks may move into the same direction or in the same proportion and at a given time. So, division of funds makes the whole fund balanced. Also, there are different types of mutual funds, though these are classified basis their principal investment according to the investment objective, but the 4 main categories mutual funds are bonds or fixed income funds, stock or equity funds​, money market funds and hybrid funds​.

Now next thing worth explanation is how many units would each of your 5 friends be entitled to, and what will be their NAV (Net Asset Value)? So, initially each of you wished to invest different amounts of money, basis that each investor will hold certain amount of units in the mutual fund, thus all in your group of 5 friends will be called unit holders. Now having invested money in a scheme, each of you 5 people will be allocated units. The value of each unit is called NAV and is reflective of the current market value of single unit holdings. When one investor invests in a fund, they actually buy units of the fund at its NAV price. Now clearly, how many units an investor can buy depends on the NAV of each unit and the total amount of investment. So, NAV per unit is calculated basis the market value of securities of a scheme less the total reoccurring expense and the whole divided by the total number of units if the scheme on any particular date. Since market​ value of securities change every day, NAV of the scheme also varies.

Now that you know what mutual funds are​ and what is Mutual fund NAV, you must further know which scheme would best suit you and while you plan to do so, do read your scheme related documents carefully

Disclaimers
The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. Certain factual and statistical information (historical as well as projected) pertaining to Industry and markets have been obtained from independent third-party sources, which are deemed to be reliable. It may be noted that since RNAM has not independently verified the accuracy or authenticity of such information or data, or for that matter the reasonableness of the assumptions upon which such data and information has been processed or arrived at; RNAM does not in any manner assures the accuracy or authenticity of such data and information. Some of the statements & assertions contained in these materials may reflect RNAM’s views or opinions, which in turn may have been formed on the basis of such data or information.

Before making any investments, the readers are advised to seek independent professional advice, verify the contents in order to arrive at an informed investment decision. None of the Sponsor, the Investment Manager, the Trustee, their respective directors, employees, affiliates or representatives shall be liable in any way for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including on account of lost profits arising from the information contained in this material.

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Disclaimer:
This is an investor education and awareness initiative by Nippon India Mutual Fund.
Helpful information for investors: All Mutual Fund investors have to go through a one-time KYC (know your Customer) process. Investors should deal only with registered mutual funds, to be verified on SEBI website under 'Intermediaries/ Market Infrastructure Institutions'. For redressal of your complaints, you may please visit www.scores.gov.in . For more info on KYC, change in various details & redressal of complaints, visit mf.nipponindiaim.com/investoreducation/what-to-know-when-investing This is an investor education and awareness initiative by Nippon India Mutual Fund.

The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The document has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. The sponsor, the Investment Manager, the Trustee or any of their directors, employees, associates or representatives (“entities & their associates”) do not assume any responsibility for, or warrant the accuracy, completeness, adequacy and reliability of such information. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Entities & their associates including persons involved in the preparation or issuance of this material shall not be liable in any way for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including on account of lost profits arising from the information contained in this material. Recipient alone shall be fully responsible for any decision taken on the basis of this document. Language Disclaimer:
While utmost care has been taken in translating the article into respective regional language(s), in case of any confusion or difference of opinion, article available in English language should be deemed as final. The article provided herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional advice for the readers. The document has been prepared on the basis of publicly available data/ information, internally developed data and other sources believed to be reliable. The sponsor, the Investment Manager, the Trustee or any of their directors, employees, associates or representatives (“entities & their associates”) do not assume any responsibility for, or warrant the accuracy, completeness, adequacy and reliability of such information. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Entities & their associates including persons involved in the preparation or issuance of this material shall not be liable in any way for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including on account of loss of profits arising from the information contained in this material. Recipient alone shall be fully responsible for any decision taken on the basis of this article. "ABOVE ILLUSTRATIONS ARE ONLY FOR UNDERSTANDING, IT IS NOT DIRECTLY OR INDIRECTLY RELATED TO THE PERFORMANCE OF ANY SCHEME OF NIMF. THE VIEWS EXPRESSED HEREIN CONSTITUTE ONLY THE OPINIONS AND DO NOT CONSTITUTE ANY GUIDELINES OR RECOMMENDATION ON ANY COURSE OF ACTION TO BE FOLLOWED BY THE READER. THIS INFORMATION IS MEANT FOR GENERAL READING PURPOSES ONLY AND IS NOT MEANT TO SERVE AS A PROFESSIONAL GUIDE FOR THE READERS."

MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY.
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