I want to start investing Rs 500 via SIPs. Please suggest a mid-cap or large-cap fund that I can invest in. Please also tell me how the NAV of a mutual fund is calculated.
-Sachin
An equity mutual fund invests the entire pool of money that it receives from various investors into different shares. The prices of these shares keep changing every day. This change in price of all the shares held by a fund is divided by the total number of units of the fund to arrive at the NAV. The fund expenses are deducted before the NAV is calculated. Hence, the NAV is the price of the mutual fund for its investors because the fund’s units are bought and sold on the basis of its NAV.
Coming to your question about your SIP investment, since you're investing for the first time, we would suggest that you begin with a balanced fund. A balanced fund gives you stability as well as growth. For a new investor, such a conservative investment would be the ideal way to begin.
This article was originally published on April 20, 2012.
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