How to Analyze & Select the Mutual Funds?
It is known that mutual funds usually pool money from investors & diversify into companies to invest in securities like stocks, bonds, money markets, and other securities. Income generated from mutual fund investments is distributed proportionately among the investors after charging applicable expenses and levies. Simply put the money pooled by investors makes up a mutual fund. As an Individual investor, it becomes imperative to understand how to analyze your fund selection before investing.
Let`s move forward with an example of the Mutual fund pool and its fund Analysis parameters.
A shopkeeper sells a pack of biscuits containing twelve pieces at ₹10 per piece. Twelve friends decided to buy the same, but they had ₹10 each, and the shopkeeper only sold the box. So, the friends decided to pool ₹10 each and buy the pack of biscuits. Based on their contribution, each one will receive one biscuit, similar to the case in mutual funds.
To calculate the cost of one unit, we divide the total amount by the number of chocolates: 120/12 = 10. So, if we multiply the number of units (12) by the cost per unit (10), we get the initial investment of ₹120. Hence, each friend is a unit holder, and the box of biscuits is collectively owned by all, with each person being a part-owner.
