Jargons to know about mutual funds for your investment onset

Jargons to know about mutual funds for your investment onset

Whenever it comes to investments, Warren Buffett is the right man. Why do we look up at him? That is because, there runs so many advice and lessons under his experience, some of which are:

  • I made my first investment at age eleven. I was wasting my life until then.

  • Be fearful when others are greedy. Be greedy when others are fearful.

  • Risk comes from not knowing what you are doing.

  • Rule no. 1: Never lose money. Rule no. 2: Never forget rule number 1.

Quite fair right? They seem to encompass the whole gist around mutual funds and investments, but for the onset of your investment journey, here are essential jargons about mutual funds that will help take the first step.

  1. Asset Management Company (AMC)

An AMC is a corporation that allocates pooled funds (collected from investors with similar financial goals) into securities belonging to different sectors and industries. Their objective is to yield more profits on the investors’ dime and bring financial development to the economy.

  1. NAV (Net Asset Value)

When you purchase stocks, the price per unit of a stock becomes your share price. Similarly, when you invest in a mutual fund, the price per unit of the mutual fund scheme becomes your NAV. A NAV of a mutual fund indicates the performance of the scheme. Comparing NAVs alone is not a very ideal way for mutual fund analysis.

  1. SIP (Systematic Investment Plan)

SIP is the easiest way to start your journey as an investor. It’s a very popular mutual fund tool that allows investors to invest as low as 500 rupees monthly. With small and periodic investments for a long period of time, you get in the habit of investing, eventually learning more about investments.

  1. SIP calculator

This tool is very useful for investors. It’s the nerdy superman encircled by investors throughout the day. A sip calculator helps to calculate the returns you would earn on availing a sip. It tells you how much of a monthly amount you need to invest to reach your target for savings.

Essentially there are three values to put in the sip calculator, they are monthly sip amount, the time period & expected annual returns.

  1. Corpus

Corpus is the total amount of money that is pooled in one particular mutual fund scheme. For example, 1000 units of a mutual fund scheme are active with a NAV of rupees 5, the sum money invested in this would be (1000*5=5000) 5000 rupees. That becomes your corpus.

Mutual funds are relatively less riskier. Diversified asset allocation benefits with lesser chances of loss, as the risk is distributed. With expert advice and management, investments become more transparent and curious. Schemes vary from factor to factor but to find your suitable scheme, there are many tools available like apps, podcasts, and also expert advisors. Start your journey, the seat belt here is well-built.

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