We have learnt that a group of persons come together to form a company. They raise capital from the society by issuing shares. If company performs well, then the investors of the company get benefits in terms of dividend, bonus shares and increase in the market value gives more profit on investments. Company's market capitalization rises. All this totality helps for the progress of the country. In short, principle of sociology 'together we can progress' works here. But every coin has two sides. sometimes it might happen that instead of profit an investor may incur a loss.
Can we reduce this loss ? Is there a way to reduce the risk in investments ? Yes, to overcome this more people invest in Mutual Funds.
In Mutual Fund, many investors with common objectives give their money to the professional experts. They not only invest in one type of shares but also invest in various other schemes. As a result, investment is diversified which reduces risk factor and total dividend or profit is divided equally among the investors. How to invest in Mutual Fund ? What is the rate of return ? What is the locking period ? What are the different types of investment schemes ? All these questions could be answered by a Financial advisor or financial planner.
"You may have heard or read this sentence that, 'Investments in Mutual Funds are subject to Market risks. Read all scheme related documents carefully before invesing.' Interpret the meaning correctly. Sometimes instead of profit,
investment in Mutual Fund might give loss which investors have to bear."
Mutual Fund is a professionally managed investment scheme, usually run by an AMC i.e. Asset Management Company. They invest the money given by the investors in different schemes e.g. equity fund (in shares), debt fund (in debentures, bonds etc.) or balanced funds as per the investor's choice. As we get 'shares' for the investment in sharemarket, we get 'units' when we invest in mutual fund.
The market value of 'a unit' is called 'NAV' (Net Asset Value)
NAV of one unit × Number of units = Total fund value.
Note : As the market value of share changes frequently NAV of a unit also changes. One can redeem the units when needed.
Write the correct alternative for the following questions.
(3) The NAV of a unit in mutual fund scheme is Rs 10.65 then find the amount required to buy 500 such units