What is nav and aum in mutual fund

A mutual fund is a pool of money collected from various investors. This collected money is called AUM (Assets under Management). Mutual Funds invest this money in various securities, including stocks, bonds, and market instruments. Mutual Fund hires professional and qualified managers to invest this money in the Stock Market or securities. Mutual Fund allocates the UNITs to investors against their investment. Units are a small portion of AUM. Just like investors purchase the shares of the company in the stock market, mutual fund investors get mutual fund units for their investments.

Each unit of a Mutual Fund has a value called NAV. NAV stands for Net Asset Value. This NAV keeps on changing as per the performance of Mutual Funds in the market. Since qualified and professional managers manage the money, the chances of getting good returns are high. Investors’ net worth keeps on changing as per the current NAV of the Mutual Fund. Investor’s Net Worth is equal to the total number of Units held by investors multiplied by the current NAV. The following are the advantages of investing in Mutual Funds.

2. Diversification and Safe Investment:- Investor can easily diversify their investment in a variety of market instruments depending upon the selection of Mutual funds. Investors’ risks get diversified very easily. Mutual Fund investing is safer as compared to stock investing because a Mutual Fund invests in a bunch of stocks or securities managed by a professional Fund Manager. It is very difficult for individuals to maintain such a diversified portfolio.

3..Easy to invest. – Investors can easily invest by way of offline and online methods. There is no need to open Trading AC and DMAT AC for investing in Mutual funds like shares. You can directly invest in Mutual Funds through a Broker or online investment Apps like Zerodha, Groww, and ET Money.

5. Good Governance:- Mutual funds are well-regulated and governed by AMFI (Association of Mutual Funds of India ) and SEBI (Securities and Exchange Board of India). These are the bodies formed by the Government to safeguard the interests of Investors.

SIP :-

The full form of SIP is a Systematic Investment Plan. In SIP, investors invest small fixed amounts at regular intervals, like monthly, quarterly, or even daily, in mutual funds. The investor has to choose an investment date on which the SIP amount is automatically deducted from their bank account. The investor had to give specific instructions to his bank regarding the same. Once the money gets paid to the Mutual Fund, Units are allotted to the Investor by the Mutual Fund. Units are allotted as per the current NAV. For every SIP, a different number of units are purchased as per the current NAV. Investors get the benefit of Rupee Cost Averaging.

Rupee Cost Averaging: –

As you all know sometimes the market is in an upward trend i.e. BULL phase and sometimes in down trends i.e. Bear Phase. The market is always dynamic. When you invest through SIP, your every purchase is in different market cycles. In a downtrend market, SIP accumulates more Units at low NAV. When the market is in an upward trend investors will get lesser units. This will ultimately benefit investors when the Market finally moves up. It helps Investor to accumulate wealth in the long run. This is known as Rupee Cost Averaging.

Advantages of SIP

1. It is easy to save a small amount of money by way of SIP.

2. It helps investors to become disciplined investors and cultivate the habit of investing.

3..Less procedure is required as compared to the purchase of shares. No need to open DMAT or Trading AC. You can easily start SIP investment through offline and online methods. The only requirement to start SIP is saving a Bank account in the Bank.

4..It is a very safe type of investment. As it safeguards investors from the ups and downs of Market fluctuations. And the  Investor gets the benefit of Rupee Cost Averaging. It is a very handy investment style that creates capital appreciation in the long Run.

5. There is no need to track the market frequently, as we are investing in Mutual Funds via SIP.  So, the average purchase price will be much less and will give profit in the long run.

Conclusions:-

1. Mutual Funds are a safe, secure, and easy instrument to invest in for investors.

2. NAV:- stands for Net Asset Value.

3. SIP:- Stands for Systematic Investment Plan. By investing in Mutual funds via SIP, investors can accumulate wealth in the long run with minimum risk.

4. Rupee Cost Averaging: The Investor gets Rupee Cost Averaging benefits when he invests by SIP.