JMC MPHW Merit list 2021 exam date 02/11/2021
Mutual funds are an ideal way of investment where an investor may choose to invest in a fund and asset of his choice, be it equity debt or gold. Professionally managed by financial experts, these funds help you create wealth in a tax-friendly way. Investments are flexible and give you an array of choice to buy, mix, churn, transfer or redeem conveniently.
But when we visit any Asset Management Company (AMC) website we come across various terms and jargons that are difficult to understand. So, let us go through the below-mentioned terms to get a clearer insight and understanding of the world of mutual funds.
AMC (Asset Management Company)
Asset Management Company is the company that manages funds of individuals. A mutual fund is a trust registered under the Indian Trust Act. It is initiated by a sponsor. A sponsor is a person who acts alone or with a corporate to establish a mutual fund. The sponsor then appoints an AMC to manage the investment, marketing, accounting and other functions pertaining to the fund. Various funds can be introduced by a single AMC according to investment objective. It is a pool where funds are collected and invested professionally and the returns are distributed proportionally. In India all AMCs are required to get themselves registered with SEBI before starting its operations.
NAV (Net Asset Value)
Net Asset Value or NAV often heard and a familiar term when we talk about mutual funds. Most of us have heard this term and use it on and off but very few of us know what exactly this term connotes and how is it interpreted. In a layman’s language it is the price per share or unit of a mutual fund. As stocks have a share price, mutual funds have NAV. If we are buying 100 units of a mutual fund then we buy it at its NAV. Though share price fluctuates throughout the day at exchanges, the NAV does not change. NAV of a fund is calculated at end of the trading day.
NAV is calculated as: (Assets of the fund-Liabilities of the fund)/Number of outstanding units of the fund
It is the indicator of the fund’s performance over a period of time. If one tracks the NAV of a fund over a specific period he/she may be able to gauge how the fund has been performing and take investment decisions. A lower NAV does not mean that the fund is not doing well or a fund with a higher NAV is performing better. Absolute comparison is not the means by which two funds should be compared, the relative growth should be taken into account for the same period to ascertain fund performance and should be used to take investment decision.