Mutual fund gyan again..

Money Market Funds

The money market consists of short-term debt instruments, mostly T-bills.

Bond/Income Funds

Income funds are named appropriately: their purpose is to provide current income on a steady basis. When referring to mutual funds, the terms "fixed-income," "bond," and "income" are synonymous. These terms denote funds that invest primarily in government and corporate debt.

Balanced Funds

The objective of these funds is to provide a "balanced" mixture of safety, income, and capital appreciation. The strategy of balanced funds is to invest in a combination of fixed-income and equities. A typical balanced fund might have a weighting of 60% equity and 40% fixed-income. The weighting might also be restricted to a specified maximum or minimum for each asset class.

Equity Funds

Funds that invest in stock represent the largest category of mutual funds. Generally, the investment objective of this class of funds is long-term capital growth with some income.

Costs of mutual funds

Fees can be broken down into two categories:

Ongoing yearly fees to keep you invested in the fund.(Expense ratio)

This includes the salary of the fund manager, the regular administrative cost, and the brokerage and advertising charges. Expense ratio ranges from 0.2% to as high as 2.0%.

Transaction fees paid when you buy or sell shares in a fund (loads).

These can be of two types:

• Front end loads – This is a percentage that goes from the amount you invest. If you invest Rs 10000 on the mutual fund, having a 5% front end load, you end up paying Rs 500 as the front end load, and Rs 9500 goes for investment.
• Back end loads – This is a kind of penalty in case you sell your share before a particular time. A typical is a 6% back end load that decreases to 0% in the seventh year.
• A no load fund sells its shares without a commission.

The Value of Your Fund

Net asset value (NAV), which is a fund's assets minus liabilities, is the value of a mutual fund. NAV per share is the value of one share in the mutual fund, and it is the number that is quoted in newspapers. You can basically just think of NAV per share as the price of a mutual fund. It fluctuates everyday as fund holdings and shares outstanding change.

When you buy shares, you pay the current NAV per share plus any sales front-end load. When you sell your shares, the fund will pay you NAV less any back-end load.

Investing in Mutual funds is through a demat account. This account can be acquired by any of many banks providing these services.

Source: www.investopedia.com