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Showing posts from July, 2013

Mutual Funds Mythbuster

Rahul is working for a mutual fund house. They have recently come out with an NFO (new fund offer). The day on which the fund house announced its maiden NAV (net asset value), he received lot of calls from investors asking why the NAV was below par. They thought something was wrong. Rahul went on clarifying to them that though both an equity fund and a stock extend market-related returns, there are some key differences between the two. If you have similar misconceptions about equity funds and stocks, this article will help demystify all such misconceptions. New Fund Offerings: A new fund offer is not likely to generate amazing returns as can be the case with an initial public offering of a company. This is because the NAV reflects the market value of the stocks held by the fund on any given day. Because a fund holds several stocks in its portfolio, the NAV can only reflect the combined returns on the portfolio between the NFO date and the date of first NAV. The firs...