Fluctuations of shares are referred by price (Stock Price) whereas in case of mutual funds, they are recognized as a Net Asset Value (NAV) which is used to track your fund’s performance (Mutual Fund NAV or Mutual Fund Prices).
Let us understand with examples of mutual funds how does a mutual fund work:
Portfolio Scenario-1; Example of Mutual Funds:
Assume that we wish to buy SBI Pharma Fund – Growth which belongs from sectorial based growth stock mutual funds. Asset allocation consists of investing 90 to 95 percent into Pharmaceutical stocks and remaining 5 to 10 percent into Cash or Money Market. Let us evaluate on the note when we say Pharmaceutical sector are best in investment returns based on past performance.
| Fund Name: | SBI Pharma Fund (G) |
| Fund Family: | SBI Mutual Fund |
| Fund Class: | Sector – Pharma & Healthcare |
| Asset Allocation: | 90 – 95% Investment in Pharma Shares |
| NAV (As on 01-Jun-2009) : | 26.00 |
| NAV (As on 01-Jun-2015) : | 134.00 |
| Returns after 6 years : | 515% |
| Recommendable Sector : | Best performing mutual funds |
Conculsion:
Looking at the above table, It is fairly clear that if you invest around Rs.10,00,000/- you can accomplish to get Rs.51,50,000/- after 6 years which can be classified as high yield mutual fund. Equity or Sector based funds are classified as best mutual funds to buy in long run. These type of investments are also categorised as one of the equity investment strategies or retirement investment strategies.
Portfolio Scenario-2; Example of Mutual Funds:
Assume that we wish to buy ICICI Prudential Long Term Plan – Retail Plan (G) which belongs from Debt Funds or Bond Funds. Asset allocation consists of investing 90 to 95 percent into Government Securities Bond and remaining 5 to 10 percent into Cash or Money Market instruments. Let us check the performance of the Bond Mutual Funds based on past returns.
| Fund Name: | ICICI Prudential Long Term Plan – Retail Plan (G) |
| Fund Family: | ICICI Prudential Mutual Fund |
| Fund Class: | Debt Long Term |
| Asset Allocation: | 90 – 95% Investment in Government Debts |
| NAV (As on 01-Jun-2009) : | 19.00 |
| NAV (As on 01-Jun-2015) : | 32.00 |
| Returns after 6 years : | 168% |
| Recommendable Sector : | Top last mutual funds to buy |
Conculsion:
Looking at the bond past performance returns, It is understandable that investing in bonds around Rs.10,00,000/- can achieve you to take home Rs.16,80,000/- after 6 years which cannot be recommended for long term investing strategies. Since bond funds / fixed income funds are best short term investments for risk free returns. You can additional investigate on online shares investment types of mutual fund websites which can best fit to your requirement needs.