Mutual funds are market linked instruments, which invest in equity or equity related securities, debt and money market instruments. The Net Asset Value (NAV) of a mutual fund scheme depends on the market price of the underlying securities in its portfolio.
Financial planning is the process of defining different financial goals, quantifying these goals factoring in inflation and having an investment plan to meet these goals. Financial planning also prepares you for unexpected risks e.g. untimely death, serious illnesses, sudden loss of employment etc.
Mutual Fund redemption is a process wherein an investor sells his/her mutual fund units back to the mutual fund company (AMC). It means they are withdrawing units (known as redemption in mutual fund parlance) to obtain returns/ principal from the mutual fund scheme
Equity Linked Savings Scheme (ELSS) is an equity oriented diversified mutual fund scheme which not only helps investors build their wealth, but also saves taxes at the same time.
While awareness about Exchange Traded Funds (ETFs) is quite low in India, these funds are gaining traction amongst investors over the last few years. In the last 5 years, the mutual fund industry assets under management (AUM) in ETFs have grown at a CAGR of more than 100%. In the developed markets, ETFs and index funds are hugely popular with investors.
The concept of a Mutual Fund works on pooling resources with one common objective in mind. In other words, a Mutual Fund is made up of money that is pooled together by a large number of investors. Their money is given to a professional (referred as fund manager) to invest in a basket of stocks and/or other financial instruments such as bonds/commodities.
Financial planning is not only about saving and investing. In fact, ensuring cash flow to meet planned expenses is avital component of financial planning. On this account, mutual funds with dividend option have been one of the preferred go-to investment vehicles.
The recent rise in domestic and global bond yields hasspooked investorsof debt funds - anincreasein yields leads to a fall in the value of traded bonds. thereby denting fund returns. However. as with any other asset class. debt instruments have their ups and downs; they closely track the interest rate movement.
The materials are a part of Investor Education and Awareness initiative of Mirae Asset Mutual Fund.
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