![]() Dividends may be received by an investor who has chosen to invest in the dividend option of the equity fund scheme, while in case of growth no dividend is received by the investor but capital appreciation occurs based on the increased NAV. At this point, the mutual fund may decide to redeem these shares at the higher value and the profits may be distributed as dividend to the investors, which would bring the NAV down to the previous level or they make be reinvested in a different scheme which shows potential. 500 in this case, which in extension increase the NAV or Net Asset Value of the fund’s units by a proportionate amount. So the AUM or assets under management for the fund increases by Rs. Later, when the share price of X increases to Rs.20 at a later date, the value of those shares increases to Rs. Suppose an equity mutual fund invests in 100 shares of company X at Rs. They make a profit whenever the price of shares they are invested in goes up. company shares, usually ones listed on the stock exchange. Equity mutual funds as the same might suggest, mainly invest in equities i.e. The key difference among the three is based on the type of investment these hold. The simplest classification of mutual funds is in 3 key categories – equity mutual funds, debt mutual funds and hybrid mutual funds. I guess that at least partly explains why mutual funds have become extremely popular as investments that can beat inflation consistently in the long term. Also take into account the fact that inflation during the same period was around 8%, which makes the fixed-rate investments even less lucrative in retrospect. Compare that with the much lower ROI of PPF at 7.9%, fixed and recurring deposits at around 7% and so on. In fact in case of debt and money market investments, yields actually increase due to increased investments when interest rates fall. The reason why mutual funds have managed this is because they are market-linked instruments, hence when markets witness a bull run, their value increases. The average equity mutual fund in India has provided annual returns of around 15% over the past 5 years, while hybrid and debt funds are not far behind with average returns of approximately 12% and 9% respectively during the same period. In case you are wondering about the quantum of these returns, there is statistical data available to sort that argument out. ![]() This especially holds true in the current scenario when we are witnessing falling interest rates, which are making interest rate-based investments like PPF, fixed deposits and recurring deposits a lot less lucrative than they were previously. The answer is actually quite simple – the potentially high returns on offer. What makes mutual funds better than these time tested investment options? You might ask. At this point you might point out that there are quite a few other investment options available to an Indian investor including but not limited to PPF, VPF, fixed deposits, recurring deposits, NSC, NPS, KVP and so on. they help investors save and make their investment grow over time. ![]() Mutual funds as is commonly understood are investment instruments i.e. But before we go into the details of these, let’s first understand what mutual fund returns actually mean from the investor’s perspective. There is however a freely available tool at the disposal of all and sundry that can help compare different mutual funds schemes, it is the mutual fund returns calculator sometimes also called the mutual fund calculator. Though having multiple choices at your disposal might seem to be a good thing, considering the sheer number of fund houses operating in India and the number of mutual fund schemes each of them offers, it is only natural that the average individual investor gets a bit overwhelmed. As a result of their increasing popularity, more and more players have entered into this once fledgling market and introduced a wide range of products. In recent years mutual funds have emerged as one of the most popular avenues of investment for individuals and institutions alike.
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