What is mutual funds ?

Mutual fund is such a financial instrument used for investing which provides you an oppertunity to invest in stock markets and gain out of it with reduced risks. ie People who have less expertise to invest in stock market and lack with the skills or time they invest in a collective investment vehicle known as Mutual fund
Let me explain you by an example..

there are 5 friend A<B<C<D<E

They all want to invest in stock markets but they don't have that much knowlegdge and time so they collect money 10000 each and give to A as he is expert. After a year the money becomes 1 lakh so they distribute among them equally.

If such things are done at large ie National level or universal level than they do it through Mutual funds

Totol money is devided into units of 10 Rs each and profit is calculated on unit basis

ie New MF is priced at unit of 10Rs. If you invest 10000Rs u will be alloted 1000 units. When the stocks of this MF will grow the price of each unit will increse lets say 15 Rs after 1 year. Now when you will sell your 1000 units at a price of 15each you will get 15000 ie 50% Returns. The performance is measured by NAV (NET ASSET VALUE) of the fund

Calculation of Net Asset Value

Mutual Funds raise money by selling their shares to public and redeeming them at current net asset value. Net Asset Value is the value of assets of the each unit of the scheme. Thus is the NAV is more than the face value of Rs 10, there is an appreciation for the investment. If the NAV is less than the face value, it indicates the depreciation of the investment. NAV also includes dividends, interest accruals and reduction of liabilities and expenses apart from market value of investment. Every Mutual Fund shall compute the NAV of each scheme by dividing the net asset of the scheme by the number of units of that scheme outstanding on the date of the valuation and public the same at least in two daily newspapers at intervals not exceeding one week. However, the NAV of any scheme for special target segment or any monthly scheme which are not mandatory required to be listed in the stock exchange may publish the NAV at monthly or quarterly intervals as permitted by SEBI.

The formula for calculation of NAV

Mutual funds, also called Unit Trust, are a pool of funds collected from like-minded investors. These funds are further invested, managed by expert financiers of the mutual fund trust company or AMC on behalf of the investors in the equity and debt markets.

These are open-end funds that are not listed for trading on a stock exchange and are issued by companies which use their capital to invest in other companies. Mutual funds sell their own new shares to investors and buy back their old shares upon redemption. Capitalization is not fixed and normally shares are issued as people want them.

E.G.: if u buy stocks of ICICI, it will invest in another fund. so, ur mutually using ur money. Mutual fund!

fund manegers culect money from investers and they invest in diferent company shares and earn benifits. it is a good operchunity for investers to get good benifit,in my expeirience

wo fund jo mutual ho

As you can tell it is hard to concisely define mutual funds.

For brief and clear answers to these type of questions I would suggest "The Wall Street Journal Guide to Understanding Money & Investing" by Kenneth M. Morris and Virginia B. Morris.

It's only 150 pages long, you can get it used for about two dollars and it has very precise information.

http://www.amazon.com/Street-Journal-Guide-Understanding-Investing/dp/0684869020/sr=1-1/qid=1162948742/ref=pd_bbs_1/104-8240933-7779160?ie=UTF8&s=books

Mutual Funds are products that offer investors with the unique benefit of professional management along-with diversification of assets. Mutual Funds are products that pool the savings of a number of investors and invest in different capital market instruments to realize income for them depending upon the risk-taking capacity of the investor.

Mutual Fund is a collective indirect route to the Stock Market.

When one individual takes decision of investment, numbers of considerations are to be made. The parameters for his decisions are like in which company one should invest, when, how much, when to reshuffle etc. This requires certain appraisal skills plus good deal of time and attention. One has to devote to the subject and remain in touch with the market. In case one has limitation of fund, he can not have the required spread of Scripps in the portfolio. When one or more criterions are not taken care of in course of investment decisions, this result in unremunerative investments. One develops apathy to the subject, and then blame the hard luck.

Mutual Fund is a collective investment medium. If you have Rs. 10000 to be invested in equities, can you work out good portfolio? Perhaps one can not buy even one scrip in a market lot. But if there 99999 others like you to put up investment jointly with you, the total sum available for investment shall be Rs. 100 crores. This collection is called a `corpus' that can be properly invested in Stock Market, and monitored systematically.

Mutual Fund is a collective investment medium. In addition to just collection of funds and investing, it has advantages in terms of providing for good equity research in house, maintain close touch and also the bargaining capacities on account of good volume of funds. The benefits of mutual funds are a) collective fund management b) benefits of equity research c) constant touch with the market and d) bargaining power. The earning that accrues to the fund is distributed to investors. There are no taxation implications, since mutual funds are exempted from income tax. They of course charge asset management fees. But this is a small cost against the benefits that comes to the investors.

In Western Countries, this is the most popular route of investments. We are hearing of all these FIIs. They are nothing but those overseas mutual funds.

Until 1991, there was only one mutual fund - Unit Trust of India. Permission for private mutual funds is now given in this liberalization era. Initially all the banks and insurance companies had jumped in this field but could not deliver satisfactory results. So investors have developed apprehension. In recent time the funds like Birla, JM, Kothari, Alliance, Tempelton, Merryl Lynch have come and are addressing the subject with the professional approach.

We give here below the terms used in different type of mutual fund schemes.

CORPUS: This is a total collection of funds from investors, available for investment.

GROWTH SCHEME: In this type of schemes, the corpus is invested in equity shares of companies.

INCOME SCHEME: In this type of schemes, the corpus is invested in fixed income categories like bonds, debentures etc.

BALANCE SCHEME: Here corpus is deployed both in shares as well as debt investments in pre-defined proportions.

MONEY MARKET SCHEME: Here corpus is invested in money market instruments like commercial papers, bills discounting, treasury bills etc.

NAV: Net Asset Value of all the investments at the current market rates.

OPEN-ENDED SCHEME: In this type of scheme, investment as well as withdrawals can be made at prevailing NAV.

CLOSE-ENDED SCHEME: In this category, investment can be made only for a specific period of time.

SECTOR SPECIFIC FUND: Here the investment philosophy is that of corpus to be invested in particular sector only. For example Kothari Infotech Fund is investing only in Information Technology companies' shares. Kotak's K-Gilt funds are invested in Government securities only.

TAXATION:

In order to promote mutual fund business, Government has granted certain taxation benefits to this category of investments.

Section 54 EA - If the entire proceeds of the capital asset sold are invested within 6 months of sale for a period of 3 years, there is exemption from Long Term Capital Gain Tax.

Section 54 EB - If the gain portion of the capital asset sold is invested within 6 months for the period of 7 years, there is no tax on Capital Gain.

More over investment in mutual fund for more than one year is accounted as a Long Term Capital Gain, and not as normal income. So there is benefit of lower rate as well as indexing. Again if the proceeds/gain is reinvested as outlined in Section 54 EA/54 EB, there is no tax.

So it is possible to do prudent tax planning. One can combine benefits of Mutual Fund and Tax planning to derive maximum benefits.

Mutual Fund is one very good avenue of investment

A mutual fund is a form of collective investment that pools money from many investors and invests the money in stocks, bonds, short-term money market instruments, and/or other securities. [1] In a mutual fund, the fund manager trades the fund's underlying securities, realizing capital gains or loss, and collects the dividend or interest income. The investment proceeds are then passed along to the individual investors. The value of a share of the mutual fund, known as the net asset value (NAV), is calculated daily based on the total value of the fund divided by the number of shares purchased by investors.

Legally known as an "open-end company", a mutual fund is one of three basic types of investment companies available in the United States. [2] Outside of the U.S. (with the exception of Canada which follows the US model), mutual fund is a generic term for various types of collective investment. In the UK and western Europe (including offshore jurisdictions) other forms of collective investment are prevalent including unit trusts, Open-Ended Investment Companies (OEICs), SICAVs and unitized insurance funds.

A mutual fund enables investors to pool their money and place it under professional investment management. The portfolio manager trades the fund's underlying securities, realizing a gain or loss, and collects the dividend or interest income. The investment proceeds are then passed along to the individual investors. There are more mutual funds than there are individual stocks.

A mutual fund is a form of collective investment that pools money from many investors and invests the money in stocks, bonds, short-term money market instruments, and/or other securities. [1] In a mutual fund, the fund manager trades the fund's underlying securities, realizing capital gains or loss, and collects the dividend or interest income. The investment proceeds are then passed along to the individual investors. The value of a share of the mutual fund, known as the net asset value (NAV), is calculated daily based on the total value of the fund divided by the number of shares purchased by investors.

Legally known as an "open-end company", a mutual fund is one of three basic types of investment companies available in the United States. [2] Outside of the U.S. (with the exception of Canada which follows the US model), mutual fund is a generic term for various types of collective investment. In the UK and western Europe (including offshore jurisdictions) other forms of collective investment are prevalent including unit trusts, Open-Ended Investment Companies (OEICs), SICAVs and unitized insurance funds.

They are businessmen and they know how to do it.They do it for you by investing your money in the shares securities etc.and take some benefit out of it.

Mutual Fund is a investment company that pools money from shareholders and invests in a variety of securities, such as stocks, bonds and money market instruments. Most open-end mutual funds stand ready to buy back (redeem) its shares at their current net asset value, which depends on the total market value of the fund's investment portfolio at the time of redemption. Most open-end mutual funds continuously offer new shares to investors.

Also known as an open-end investment company, to differentiate it from a closed-end investment company. Mutual funds invest pooled cash of many investors to meet the fund's stated investment objective. Mutual funds stand ready to sell and redeem their shares at any time at the fund's current net asset value: total fund assets divided by shares outstanding.

In Simple Words, Mutual fund is a mechanism for pooling the resources by issuing units to the investors and investing funds in securities in accordance with objectives as disclosed in offer document.

You need to visit this web site bellow. However there are far better resource available on the web. I found this page to meet your exact needs. If you find it difficult then you must visit the professional web sites. The best way is to visit the sponsered links on the web page. They are from the highly qualified fund managers from India's best fund house like Pru ICICI, HDFC, RELIANCE, etc....

mutual funds are the funds that are pooled from general public and invested in stock market by fund manager in professional way in the ratio of proposed in the offer document. in mutual funds the risk is diversified but in shares its high than that of mutual funds by conventional investment.

offer document is the document in which all terms and conditions mentioned before inception of the fund under the regulations of SEBI.

In Shares we will be investing in one company only.
but in mutual funds the funds are invested in many companies investing in many companies is called conventional investment.

mutual funds are subject market risk please read offer document carefully before investing

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