When I was a beginner in investment, “mutual fund” was the most heard term. But more than I was interested to invest in it, I wanted to know what is a mutual fund in first place? I could understand that, mutual fund is an investment option like stocks, real estate, gold, bonds, etc. Investment options are alternatives, where money can be invested for different investment goals. But apart from this knowledge that mutual fund is an investment option, generally people do not know more about mutual funds.
What is NAV of mutual fund? NAV means “Net Asset Value”. The significance of NAV for us is, we buy units of a mutual fund scheme at its current NAV. Like ‘share price’ is for stocks, ‘NAV’ is for mutual fund scheme’s. But the similarity of NAV with share price ends here itself. Why I say so? Because lower is the share price the better. But we cannot say the same thing for NAV. How? NAV of mutual fund can decide its returns?
Is it for real to say that all mutual funds are not the same? Are there really different types of mutual funds operating in India? Yes, every mutual fund scheme is unique. What makes it unique? Its portfolio composition. The philosophy that goes behind building a mutual fund scheme’s portfolio makes it unique. The philosophy will decide which constituents (securities) gets added to the portfolio. A mutual fund will have different securities in its portfolio. But all of them will have a common theme…
What will be the tax on mutual fund returns in India? To understand the tax treatment of mutual fund returns, we have to first answer a simple question. In what forms, an investor can earn returns from mutual fund schemes? There can be two form of returns, capital appreciation, and dividend income. The above two returns becomes taxable as soon as it reaches in the hands of the investor. But tax treatment varies between equity based and non-equity based mutual funds.
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