What is a mutual fund? Investors should know these things  

Oct Fri 2020 06:44:49

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What is a mutual fund? Investors should know these things  

A mutual fund is a company that invests in a variety of sectors and companies, including small and low-risk investors in a large portfolio. A mutual fund is a collective investment fund. Every investor who invests here becomes a member of a group of companies. Mutual fund companies are run by people who are prudent and have knowledge and experience in related fields.

These companies spend a lot of labor and time to invest. As a result, these funds invest in companies that offer good returns, potential and perform well in related fields. These funds invest in companies, bonds, bonds, government securities, term deposits, etc. in various sectors. When investing for the sake of sustainable profit, these companies give good returns. The main basis in the analysis of a mutual fund is the net asset value of the company. This indicator evaluates the total assets of the fund.

There are two types of mutual funds: Net Asset Value Per Unit.

1) Open Ended Fund - Open Ended Fund sells shares to investors at any time and repurchases if the investor comes to sell. There is no fixed time limit for this fund. This type of fund is not listed on Nepse so it cannot be traded in the secondary market.

2) Close Ended Fund - This type of fund does not issue another share under the scheme for a certain period of time after issuing shares once. This type of fund is listed on Nepse and can be bought and sold through this broker.

Mutual funds are also issued at discounted and premium prices. If shares are issued at a price higher than the asset value per unit, it is understood to have been issued at a premium.

Conversely, if a share is issued at a price less than the asset value per unit, it is understood to have been issued at a discount.

Some features of mutual funds -

1) Diversification In Investment - Mutual funds are invested in various sectors which helps in minimizing risk.

2) Liquidity - Open fund investors can sell within a specified period of time which is equal to the net asset value per unit. Such funds are liquid assets.

3) Proper Investment Management - When investing in a mutual fund company, the responsibility of investing is informally given to an experienced portfolio manager who makes decisions after extensive research and study.

4) Government Convenience and Transparency (Government Convenience and Transparency) Mutual funds should operate in accordance with government policies and laws and the government regulates such companies. If necessary, the government modifies and changes the policy. In addition, these companies impartially disclose the transparency of important reports such as financial statements and budget statements. At present, there are 13 mutual fund companies in Nepal with a total initial cost of more than one billion rupees.