How does mutual funds work and if i invest 10000 rs in any mutual fund how much will i get after 5 years ?

Question

reply to my mail id [e-mail] or [e-mail]

Answer 1

View It Now: http://www.stockEXE.com

Answer 2

You should make about 5k, that is not including what you add to that as it grows

Answer 3

About Mutual Funds



What is a mutual fund? It is an investment company that makes investments on behalf of individuals who share common financial goals. In simple terms, there are a pool of investors such as you and me who invest their money through a portfolio manager. This portfolio manager will use these investments to buy stocks of different companies to meet the fund's objective. There can be as little as 25 companies or over 100 different companies in a mutual fund. With so many companies or stocks in a mutual fund, a mutual fund is considered to be diversified. Diversification leads to lower risk because your investment is spread over several companies. The great thing about having a mutual fund is that you don't have to worry about which stocks you should buy and when to sell. The portfolio manager takes care of all that for you.

Here are some benefits of owning a mutual fund:

1) They are professionally managed. That means there are one or two portfolio managers who has many years of investing experience.

2) They are diversified. This means that a mutual fund invests in many companies, some of which you already know or heard of such as Disney or Microsoft.

3) You may receive dividend payments, though this is not guaranteed.

4) Any dividends you do receive can be automatically reinvested.

5) Mutual funds are regulated by the United States Securities and Exchange Commission (SEC). All funds must provide a prospectus, which describes the fund in great detail, to every investor.

6) Mutual funds will send you an annual statement showing your income and capital gains, if any for tax reporting purposes.

7) Your money is always available. Should you decide to sell your shares, your mutual fund will buy your shares at the current net asset value. By law, mutual funds must send you a check within 7 calendar days. Be careful if your mutual funds are in a retirement account. You may pay a 10% penalty if it is in an IRA.

8) Tracking your investments is easy. Most major newspapers have a daily listing of the fund's performance. Plus you'll receive fund statement whenever you make a transaction, as well as semi-annual or annual statements on your progress.

9) There are a variety of objectives. Every mutual fund has a specific investment objective, from aggressive growth to conservative growth to everything in between.

10) There is a potential for growth. Historically, mutual funds have far outperformed more conservative investments. There is some risk, but the returns in mutual funds offer a far better potential for growth than investments that are completely risk free.

Things you should do when choosing a mutual fund:

1) Obtain a prospectus, which is a small booklet that contains lots of information about that particular mutual fund you are looking at.

2) Check if this fund's objective is meeting your investment objective.

3) Check the past performance of this fund. While past performance cannot guarantee future results, it gives a good indicator on how well the fund has been managed.

4) Check its sales charge. Studies has shown that Class A shares or Class B shares has no distinct advantage over the other. Whether you pick Class A or Class B, its totally up to you. Class A shares mean you pay an upfront sales charge. Class B shares mean you don't pay any sales charge when you invest, but if you redeem the shares in the first 5-8 years, you will pay a sales charge on the shares you are selling. This sales charge decreases by 1% every year until it hits zero. Class B shares become Class A shares after 8 years.

6) This is the most important factor when choosing a mutual fund. Check its expense ratio, which is usually shown in the tables near the end of the prospectus. You want to pick funds with a low expense ratio since this will effect the rate of return of your porftolio over the long run.

7) Check its turnover ratio. A fund with a high turnover ratio (anything above 50%) is never good. The turnover ratio means how often a fund sells and buys shares of a stock. If the fund is constantly trading, it incur costs each time it buy and sell shares of a stock. Usually aggressive growth funds or high growth funds has a low turnover ratio and conservative funds and bonds have a high turnover ratio.

Things you should do when investing in mutual funds:

1) Ignore all headlines and news media since they don't provide any details or information about the mutual fund.

2) Depending on your income level, you maybe able to put your funds in a tax-deferred account such as a Roth IRA. If you have kids and want to start a college fund, invest in 529 Plans. Tax-deferred accounts always have a higher capital gain advantage over taxable accounts.

3) You should setup a systematic investing plan with your mutual fund(s). This means, you invest your money each month. When you setup a systematic investing plan, you give your bank account number to the fund and the fund will automatically take money out of your bank account on the same day each month. With most funds, the minimum to invest systematically is $25/month. Why systematic invest? On some months, price of a share maybe high, so you buy fewer shares of that fund. On other months, price of a share maybe low, so you buy more shares of the fund. This is known as dollar cost averaging, which lowers the cost per share.

4) Never pull out when stock market crashes. This is only a temporary phase. Instead of pulling out, you should continue to invest. Since prices are so low, you can buy lots of shares. While they don't worth much at that moment in time, the stock market will always rebound.

5) Over time, your investment objective will change. So, you need to make some changes in your portfolio as well.

6) Stick within the same fund family. For example, if you invest in Legg Mason Partners Fund (formerly known as Smith Barney), then pick mutual funds from this family. Don't mix your portfolio with so many different families. Investing in two fund families is good enough such as Legg Mason and Van Kampen. Though, its up to you on whether you want to invest with other fund families. The reason why I don't mix my portfolio with so many different families is because of the sales discount. If the value of all my mutual funds (including your spouse and children under age 21) in the same fund family meets a certain limit, which is $25,000, I get a sales charge discount. The lower the sales charge, the more of my money is being invested.

7) The earlier you invest, the less you need to save toward retirement. So, stop procastinating, stop saying "I don't have any money" because you can invest as little as $25/month and start saving!

Rule of 72



Why is that we go through high school and even college, that teachers and professors don't talk about the Rule of 72? And when they do to teach it, they briefly go over it and say "its not important on the exam." That's great there's one less question on the exam because calculating it is so simple. But in real life, this can have a big impact on your view on savings accounts, CDs, and investments.

What is the Rule of 72? Rule of 72 is a mathematical formula that tells you how long it will take for your money to double given the interest rate. This formula was discovered by Albert Einstein, who is one of the most brilliant physicists genius in the entire history of civilization. Let's say the average yield or interest rate on a savings account is 3%. 72 divided by 3 = 24. If you put in $1000 now in the bank and never touch it again, it will take 24 years for your $1000 to become $2000. Stinky isn't it?

What if you put it into CDs? CD's have an average yield of 6%. 72 divided by 6 = 12. It will take 12 years for your $1000 to become $2000. A little bit better, but still a little slow.

What if you put into mutual funds and it historically earn a 12% rate of return in the past 25 years? 72 divided by 12 = 6. It will take 6 years for your $1000 to become $2000. How great is that?

Now you seen the various ways you can save your money, which one makes more sense to you? What interest rate or average rate return are you earning on your money? How many doubling periods do you have left until you retire?

Answer 4

You place your money into a mutual fund (you decide which type of fund, depending on risk) which is made up of a basket of stocks, or investment instruments, which increase and decrease in price.

The money you make is all dependent on how well the fund does, which in turn depends on how well the investments which make up that fund.

So there is no set amount of how much you will make. Could be negative and could be +100%, all depends.

Good luck.

Answer 5

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Answer 6

mutual funds are just a pool of cash that investors give control of to a manager or group of managers.  the goal is (typically) to preserve or grow that capital.

the returns on mutual funds are certainly not guaranteed.  the returns depend on the types of investments you allow your manager to make, and the effectiveness of that manager and his support team. fees and expenses also factor into that equation.

in 5 years, you might have turned that 10k into 100k or 1m.

or, the fund might have failed by then, and you could have lost it all.

this is why you should take your time and do your research, so that you can find a fund where you are comfortable with the investment objectives, and the associated risks.

Answer 7

Please buy a book on mutual funds basics and read which gives full knowledge about it.  very guideline only possible to explain which somebody has done before me to you.  If you want real knowledge about MF better go to book shop and spend some pennies which gives celar knowlege.  This kind of part knowledge is extremely injuries to your money.

Answer 8

if even the Fund manager knew this , he wudnt  be fund manager himself. he shall buy/short the market and sleep.

Nobody knows where the market shall head in next 5 years- their are too many factors from economy growth,political stablity and the sector u r putting money in.