Wednesday, February 4, 2015

Digging Deeper Into Mutual Fund!

A mutual fund is a type of professionally managed investment fund that pools money from investors and invests the money in stocks, bonds, money market instruments and similar assets. The combined holdings of stocks, bonds or other assets the fund owns are knows as its portfolio. Each investor in the fund owns shares, which represent a part of the holdings. For example: If a particular mutual fund includes Everest Bank stock among its portfolio holdings, the mutual fund investor does not directly own Everest bank stock. Instead the mutual fund investor owns shares of the mutual fund.

Mutual fund can offer the advantages of diversification and professional management. Most investors do not have the knowledge, time or resources to build their own portfolio of stocks and bonds. Stock investors often have extensive knowledge with fundamental analysis or technical analysis. However, buying shares of mutual fund enables an investor to own a professionally managed, diverse portfolio with little or no knowledge of investing concepts and strategies. All investors, be in beginners or pros, they all know that putting all of their eggs in one basket is not wise. Thus, leading to the investment in diversification of mutual fund. It is a rare occasion when all the stocks decline at the same time and in the same proportion. Thus, a reduced portfolio risk is achieved through the use of diversification. Mutual funds provide a variety of schemes that will suit your needs over a lifetime. As a small investor, you may not find possible to buy shares of larger corporations. Mutual funds generally buy and sell securities in large volumes which allow investors to benefit from lower trading costs. The smallest investor can get started by investing of mutual funds since the minimal investing prices is just Rs 1,000. With open end funds you can redeem the shares at any point of time you wish and receive the current market value.

Investing on a mutual fund is apparently trusting someone else with your money. Its like handing over your money to someone legally to generate more money. And since the management takes place by that particular person, at times it might be difficult for you to manage your portfolio if you want to because the allotted person has been buying and selling stocks by then.Investment on a mutual fund is beneficial. It helps to generate more money through money with least knowledge about share market. Though knowledge about the stock market is required, a considerate amount of research is required before investing in any mutual fund; but if you have an evaluated investment, chances are pretty high that you will get positive returns.

There are two primary forms of mutual fund companies: open-end and close-end companies. With an open-end fund, the fund itself will sell new shares to anyone wishing to buy and will redeem (i.e. buy back) shares from anyone wishing to sell. When an investor wishes to buy open-end fund shares, the fund simply issues them and then invests the money received. When someone wishes to sell open-end fund shares, the fund sells some of its assets and uses the cash to redeem the shares. As a result, with an open-end fund, the number of shares outstanding fluctuates through time. With a closed-end fund, the number of shares is fixed and never changes. If you want to buy shares, you must buy them from another investor. Similarly, if you wish to sell shares that you own, you must sell them to another investor from secondary market.

Until now there are already five closed end mutual funds scheme, Siddhartha Investment growth scheme, Siddhartha Equity Oriented Scheme, Nabil Balance Fund and NMB Sulav Investment Fund and NIBL Samriddhi Fund to be invested. Laxmi Capital is also managing issue of the first Mutual Fund Scheme — Laxmi Value Fund -1. They have announced this product for NFO to the individual investors as well as institutional investors within the last week of this Nepali Calendar month. First announcement notice has been published on 03 February, 2015.

As investors can invest in professionally managed portfolios with little capital, it is thus suitable for inexperienced and risk aversive investors. For those with little knowledge and time crisis, mutual fund can turn out to be the best way to invest money in shares. this way you do not even have to have the thorough knowledge about the stock market since a professional is there to manage all your funds that you have invested. Therefore, investment in mutual fund helps in gaining positive returns in long term without a lot of hardwork.