What is mutual fund? A Mutual fund is an investment that pools money from numerous investors. It is a professionally-managed investment scheme, run by an asset management company.
Before investing in mutual funds, here are some basic terms you need to know.
AMC: Asset Management Company is the company that manages the money.
NAV: The Net Asset Value is the price of a unit of a fund and this can rise or fall depending on the value of the investments.
Load: This is a fee that is charged when you buy or sell the units of a fund.
Entry Load: The percentage of the NAV that you pay as a fee when you buy a fund.
Exit Load: The percentage of the NAV that you pay as a fee when you buy a fund. If funds charge an entry load, they will not charge an exit load or vice versa.
Portfolio: It is the term given to all the investments made by the fund as well as the amount held in cash.
AUM: Assets Under Management is the total value of all the investments currently being managed by the fund.
SIP: A Systematic Investment Plan refers to periodic investing in a mutual fund either monthly or quarterly.
Closed-End Funds: This fund has a fixed number of shares outstanding and operates for a fixed duration.
Open-End Funds: This fund is available all through the year for subscription. It is not listed on the stock exchanges.