These days people get frightened hearing about investing in stocks. But sometimes they consider the same for the Mutual Funds also. But one needs to correct the assumption in this regards. Yes, mutual funds partially invest in equities depending upon the scheme structure, it is not the same like investing in stocks.
Multiple factors play a role in buying stock by the fund manager. Let’s try to first understand basic difference:
Stock Price V/S NAV
When one buys a stock, it is bought at the prevailing stock price. Thus one can buy 5 shares of a company at let’s say INR 108. But in case of Mutual Fund, one gets units at NAV (Net Asset Value).
NAV Price V/S Fund Performance
So does buying a mutual fund is as simple as finding the cheapest NAV fund? No, its not that simple. Performance of the fund is utmost important. Is current NAV higher then since inception or at least past 5 years? With how much percentage? These are very imporant questions to be asked.
Starting Point
A stock can be of any price. But one might not have sufficient fund to buy that stock. For example, if a stock price INR 700/-, one cannot buy it if he/she has INR 500/- in his pocket. But one still can start an SIP with five hundred rupees in Mutual Fund which has that stock in its portfolio. Thus, one can indirectly by those quality stocks with minimum investment.
Purpose of Investment
Remember your purpose will help you define your strategy. This strategy will help you fulfill your financial goal. When you are focused on your goal, your fund manager will take care of the fund performance.
Entry & Exit
Most of the mutual funds are open ended, i.e. you can easily come out of these investments at a click of the button. It is a similar experience like investing in a stock but with investment and not speculation in mind.
To know about Mutual Funds and to invest in one you can contact us at 9879956949 or email us at hardik@niveshplanner.com.