Common Answers to Common Questions-7

SIP explained further

Your cheques are cashed and you are allotted units based on the NAV of that date. Thus the cost of one unit of your savings at the end of the third month is not the NAV of that date, but the average price at which the units were purchased earlier. Thus you stand to benefit in the case of increasing NAV. Even in case of falling NAVs, the fall in value of your investments is not the same as that of fund, but slightly lower, as you would have been accumulated more units for the same amount of investment. Thus whichever the direction your fund goes, you stand to benefit in the case of systematic investment, as the strategy you have adopted is known as Value Averaging.

Mutual funds- Common answers to common questions.

What is the difference between Investment in equity shares and Investment in mutual funds?

• Investment in Equity shares Provides ownership in the company, Investment in mutual funds does not confer any such ownership of the company. It represents the investment in equities of various companies through an entity created for that purpose.

Investment in mutual funds means investment in stock market. Is it not?

• Not necessarily. Equity based mutual funds are only a part of the mutual fund spectrum. There can be debt based mutual funds exclusively. There can be real estate mutual funds where the assets are real estate. There can be metal based mutual funds and there can be commodity based mutual funds.
• So far in India we are exposed to equity based and debt based mutual funds. In future there can be various types are mutual funds such as Gold units. real estate units.
• In short mutual funds are pooled funds for a pre-defined objective of investment.