All you need to know about mutual funds

To re-emphasise what we mentioned in the previous chapter, if you don't have time or expertise to research direct stocks, the best way to invest in them is through equity mutual funds. The charm of mutual funds is that you have a professional fund manager who decides what stocks to buy, and when to buy and sell. The responsibility of growing your money lies with them - just like you hire a lawyer to look after your legal matters and a chartered accountant to pay your tax. There is one difference, though. Unlike other professionals, a mutual fund manager offers their blanket service to a large group of investors. Let's explain it to you in more detail. How does a mutual fund work? Since many people want to put their money in equity, the fund manager collects their money and invests it on their behalf. Say there are 1,000 such people, and all are willing to invest Rs 10,000. The fund manager would now invest this pooled money of Rs 1 crore (10,000 x 1,000) and buy stocks based on their expertise. Aprajita Anushree That's the macro part. From your point of view, you get a few units of a mutual fund upon investing. These units represent your share of ownership of the fund. But how do you know how much they are worth at any point in time? That is where NAV comes in. Aprajita Anushree What is an NAV? The worth of each mutual fund unit is called Net Asset Value (N

This article was originally published on December 07, 2021, and last updated on July 20, 2023.