A Mutual Fund or MF is a vehicle to pool money from the investing public and invest it in financial securities. The MF house or Asset Management Company (AMC) has professional money managers who take this pool of money and invest it in securities such as Shares, Bonds and Money-market instruments. These securities are held in trust on behalf of the investors with a custodian. These securities form the Portfolio of the Mutual Fund.
Basic Concepts
1. NAV or Net Asset Value
On each valuation date, the Fund calculates the market value of all the investments it holds. From this value it deducts the expenses of the Fund as of the valuation date. The result (Net Value) is divided by the total number of units held by the Fund. This is the Net Asset Value per unit, commonly referred to as the NAV or Unit Value.
On each valuation date, the Fund calculates the market value of all the investments it holds. From this value it deducts the expenses of the Fund as of the valuation date. The result (Net Value) is divided by the total number of units held by the Fund. This is the Net Asset Value per unit, commonly referred to as the NAV or Unit Value.
2. Entry Load
Entry Load is charged at the time an investor purchases the units of a scheme. The entry load is a percentage fixed by the Mutual Fund. The amount paid by the investor to subscribe at www.entbet88.com would be calculated as follows:
(Number of units x NAV) + (NAV x Entry load % x Number of units)
3. Exit Load
Exit load is charged at the time of redeeming (or transferring an investment between schemes). The Exit Load percentage is deducted from the NAV at the time of redemption (or transfer between schemes). The charging of Exit Load varies from scheme to scheme and on the terms governing when Exit Load is applicable.
(Number of units x NAV) - (NAV x Entry load % x Number of units)
Most of the diversified equity funds dont charge exit load but you should read the offer documents carefully for such information.
4. Unit Value/Unit
The Unit Value is the amount an investor pays to buy a unit in a Mutual Fund. They disinvest by selling its units.
5. Valuation Date
Each Mutual Fund is valued on a specific day called the valuation date. Most Funds are valued daily, but some are valued weekly. Others, such as Real Estate Funds, are valued monthly or quarterly.
Types of Schemes by Tenor
Open-ended: These funds are on-going and do not have a fixed maturity. Investors can encash all or part of their units at any time and receive the current value of the units.
Close-ended: These have a fixed maturity. Investors in Close-ended funds can encash their units only at the end of the maturity period.
Parties Involved
Investors: People who invest money in the mutual fund.
Trustees: Trustees are the people within a Mutual Fund organization, who are responsible for ensuring that investors’ interests are taken care of.
Asset Management Company (AMC): AMC manages the investment portfolios of schemes
Distributors: A person or a party responsible for bringing investors into the schemes of a MF
Registrars: The Registrar keeps a track of the investor’s investments and dis-investment
Custodian/Depository: An entity, usually a bank or Trust company, which holds and safeguards securities owned by a Mutual Fund.
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