Question : Mutual Fund?
(Q1)Everybody talks about investing money in Mutual Fund.suppose, you want to invest some money in Mutual Fund (CLOSE ENDED for 3 years say) (say in HDFC Tax saving Mutual Fund). How you will be paid your return after 3 years ?does the Mutual Fund company AUTOMATICALLY sends your profit(if any) by cheque to your home address ?who pays the return(profit) ? i am confused, how one will get the return(profit) ?(Q2)Now suppose,suppose, you want to invest some money in Mutual Fund (OPEN ENDED i.e you can withdraw money at any time...right ?) . now, say you want to discontinue after 3 Months.what you have to do ? i have read ...you have to "sell the Mutual Fund" ....but selling to whom ? how do i get the customer to sell?is it necessary to sell ?if i dont sell but want to withdraw what will happen ?very much confused.-------------------------------------------can you please clarify my some more doubts ?which is better mode of investment ?(1)with dividend or without dividend ?(2)close ended or open ended ?--------------------------------------i have also read a fact , that suppose you invested some mone to a MF fund company. but the MF company ruined and could not survive....thats means, you are not getting any profit...right ? your money is gone....correct ?well ok....but the most stunning fact and dangerous thing i have read is that you have to sell your furnitures,TVs,Computers and other household things to pay off the MF company . because , they say,...you too have the liability as the company ruins so you also ruin.is this fact true ?
- asked by sanko
All Answers:
Answer #1
Mutual Fund is different from Stocks.In MutualFunds , you have a fund company who is investinginto market on your behalf. When you join a mutual fund, you are actually joining a fundcompany, like HDFC, Franklin Templeton, ABN-AMROetc.You are alloted Units against the amount youpay them as per that days NAV (Net AssetValue).When you want to discontinue you write tothat fund company and they will credit the amountto your account (through ECS) or send the chequeamount to you.In between if you opted for Dividendoption you also get dividends credited to youraccount as and when fund company givesdividend.Hence you are either joining orwithdrawing from a fund company. You are noybuying or selling anything.Open Ended Fund meansyou can discontinue anytime, but generally theFund House charge an Exit Load if you withdraw themoney before six months or a year.Hope thisclarifies your doubt. If you still have doubts youcan contact me.
- answered by sandevyl
Answer #2
You have received an answer about open endedfunds. I will add a little information aboutclosed end funds. They trade like stocks. Theconcept of a closed end fund is similar to that ofan open ended fund but with this difference. witha closed end fund, only a fixed amount of sharesare issued. The money is then invested in thestock market on behalf of those who purchased theshares. Closed end funds do not trade at net assetvalue. They trade at whatever people are willingto pay for the shares. Many trade at a discount tonet assets. Some trade at a premium. There is oneother difference. Some closed end funds issuepreferred stock as a means of leverage. Normally,closed end funds that invest in bonds. There is asite that has a listing of all closed end funds.Below is the link.
- answered by muncie birder
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