A mutual fund is a pool of money professionally managed and invested in specific types of securities. The manager of that fund is guided by strict regulations. However, he monitors the value of the investments very closely so that he can maximize the earnings of the fund, while operating within the investment guidelines. A good investment manager of a mutual fund should outperform the usual alternative investments available to medium-to-large sized investors.

By buying shares of the mutual fund company of his choice, an investor adds his investment to the rest of the funds which are managed as one pool, regardless of the size of the investment of the individual investors.

A mutual fund is an easy and efficient way for an investor to have his money managed by a professional investment manager, in diversified and optimized manner.

Mutual funds are not deposit products and, as such, capital and yields are not fixed nor guaranteed. Neither are these specified beforehand.

Instead of interest, your investment earns a profit if you sell back (”withdraw” or “redeem”) your investment at a price higher than when you bought it.

The values of all the investments made by the mutual fund change daily depending on movements in interest rates (if fixed income securities) and stock market prices (if equities). Whether or not the fund manager sells these securities, he computes these values daily based on the current market prices of the securities that day. Deducting all the costs and liabilities incurred by the mutual fund company that day, the resulting number is called the “Net Asset Value”, and it is computed on a per share basis.

This Net Asset Value per Share (NAVPS) is the price of the mutual fund share for that day. It is the price at which a mutual fund share is bought from or sold to investors on that day. You can track the value of your mutual fund every banking day by checking the business section of the local newspapers.