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Definition of mutual funds is as follows - Mutual fund in a type of investment where the mutual fund investor invests in a fund which is well diversified those results to diversified risk and return. The funds are managed by professionals who continuously monitor the stock market and they are known as mutual fund manager. Here an investor can choose mutual funds as per his/her risk bearing capacity or his/her expected returns. Mutual funds are long term investments because they give good returns in long run. Its important that the mutual fund investor know the mutual fund basics. I would suggest that while investing in mutual funds an investor should take the help of mutual fund analyst. Mutual fund analyst would be able to predict the returns on the mutual fund more correctly. If you are planning for buying mutual fund, that you should know the basics of mutual funds at any cost. Without knowing the basics of mutual funds it would be difficult for you to make right investments.

• Fix on the time period for which you want to invest.
• Check your risk bearing capability.
• Check the offer document.
• Check the past performance of the mutual fund.
• How good are its disclosures?
• Check weather close ended or open ended
• Check out for entry and exit load.

• Portfolio diversification
• Low transaction cost
• Low Risk for mutual fund investor.
• Professionally managed by mutual fund manager.
• Liquidity
• Flexible.

I would say you can make money by way of mutual funds and become rich in short term. Investing in mutual funds would result in dividends. I suggest that you choose the dividend reinvestment option instead of dividend payout. As in case of payout you would get the income immediately but it would not result in wealth creation . You can also choose aggressive growth mutual funds. Again in case of aggressive growth mutual funds you earning from mutual funds is reinvested for generation of further income. Always choose to sell you mutual funds at a higher rate. As mutual fund investor you should always remember that investment in mutual funds should be for longer period as the value of the units you hold will appreciate in long run.

• Keep a record of application forms and other documents submitted
• Keep a record of counterfoil issued by the collecting authority.
• Fill the form in all respect.
• Only issue a crossed and account payee cheque and also write the application number and name on the back of the cheque.
• If you are an existing investor, quote your unique account number.

Net Asset Value or NAV is the value of one unit of investment in the fund in net assets terms. It is calculated by dividing the net assets of the fund by the number of units that are outstanding in the books of the fund.

• Variation in investment portfolio.
• Sale and repurchase of units
• Valuations of assets
• Accrual of income and expenses.

Picking and choosing a mutual fund appear to have turned out to be a very many-sided matter. There is no shortage of funds in the market the most crucial factor in determining which one is better than the rest is to look at returns. Returns are the easiest to measure and compare across funds.

1. Absolute returns measure how much a fund has gained over a certain period. The percentage disparity will tell you the return over the period.

2. Fund's benchmark -This will provide you a standard by which to make the assessment. It in essence indicates what the fund has earned as against what it should have earned. A fund's benchmark is an index that is selected by a fund corporation to give out as a standard for its returns.

3. Time period - The time period over which returns should be compared and assessed has to be the same over which that fund type is meant to be invested in. If you are comparing equity funds then you must use three to five year returns.

4. Market conditions – It is also important to see whether a fund's return history is long enough for it to have seen all kinds of market conditions.

5. Compare funds that are comparable in nature.

6. When returns are compared, make sure that the time period is equal.

Mutual Fund Companies