What is the difference between IPOs and mutual funds? And can you tell me what the value is written in the IPOs' face value.
In simple terms an IPO is an equity share that a company wants to sell to investors. To buy a company’s equity share there are two methods: you can do so directly when the company is issuing an initial public offering (IPO). This can happen when a company issues new shares and you apply for them. After the shares are released in the market and you buy them, then it is no more an IPO, you are purchasing the share from the secondary market. In the transaction under such conditions, when you are buying the share, then another investor is selling it to you and not to the company. The price is generally fixed based on its demand and supply. The IPOs are sold between bands.
A mutual fund on the other hand is a portfolio. When you invest in a mutual fund then the fund buys many shares from the market if it’s an equity fund. It buys many bonds if it’s a debt fund. With less effort you get a professional management and a diversified set of stocks. Investing through the funds one need not research on different stocks or try to time markets. Rather there is a professional manager who is doing it for you. If you trade the company’s share on your own, then you will have to take all decisions.
I have an investment in Aviva's ULIP plan wherein I have invested Rs 25,000 each in my daughter’s as well as wife’s name. I have not paid the second installment, this is for five years. Now, I am being advised that I should rather go for a mutual fund as it would be far better as my returns would be higher. What is your opinion?
Broadly put, an ULIP is not a good way of investing. It is a combination of investment and insurance. And how much of your money is being put to investment and how much is put to use in insurance is a matter set by the policy document. Our suggestion would be to move your money out of it. If you pull out now, then as of now, you will be losing only a residual value of your total investment. You must consult an insurance advisor, the person who sold you this plan, or at least read your policy document as that would help you arrive at a decision much better.