Introduction
Hi friends, I hope all of you are safe and in good health.
Hope you all enjoyed my previous blogs on stock market series.
Today, we will see about trading in Mutual funds, Exchange Traded Funds and Index funds through Infographics.
Mutual Funds
Source: https://www.wallstreetmojo.com/mutual-funds/
A mutual fund is a professionally managed investment fund that pools money from many investors to purchase securities like equities, money market funds, and bonds.
The term is typically used in the United States, Canada, and India.
Mutual funds are regulated by governmental bodies and are required to publish information including performance, comparison of performance to benchmarks, fees charged, and securities held.
A single mutual fund may have several share classes by which larger investors pay lower fees.
Source: https://www.fincash.com/l/mutual-funds-india
Types of Mutual Funds
Pros and cons of Mutual Funds
Source: https://commercemates.com/advantages-and-disadvantages-of-mutual-fund/
How to invest in Mutual Funds?
Source: https://jamapunji.pk/knowledge-center/how-invest-mutual-funds\
Exchange Traded Funds
Source: https://in.pinterest.com/pin/121386152439647071/
An exchange-traded fund (ETF) is a type of pooled investment security that operates much like a mutual fund.
Typically, ETFs will track a particular index, sector, commodity, or other asset, but unlike mutual funds, ETFs can be purchased or sold on a stock exchange the same way that a regular stock can.
Investors can take long and short positions in ETF shares; they can execute market, limit, and short orders; they can purchase the shares on margin.
Types of ETFs
Source: https://mint.intuit.com/blog/investments/what-is-an-etf/
Pros and Cons of ETFs
Source: https://mint.intuit.com/blog/investments/what-is-an-etf/
Transaction of Exchange Traded funds
Source: https://tavaga.com/blog/what-is-an-etf/
What is an ETF creation/Redemption basket?
ETFs benefit from a unique process called creation/redemption.
Creation involves the buying of all the underlying securities and wrapping them into the exchange traded fund structure.
Redemption is the process whereby the ETF is ‘unwrapped’ back into the individual securities.
Net Asset Value
The net asset value is the value of an investment fund’s total assets divided by the number of its units, minus costs, and fees.
- An MF’s unit price is the same as its NAV.
- But for an ETF, the NAV is not its unit price as the unit could be trading at a premium or discount to the NAV on the exchange.
Expense Ratio
ETF fees or “expense ratios” are charged by the fund manager which is how the brokerage makes their money.
Typical fees range from 0.03% all the way up to 1% or more.
The fee is the amount of money that will be deducted from your portfolio over the course of one year.
Tracking Error
Tracking error is the standard deviation of the difference between the returns of an investment and its benchmark.
Given a sequence of returns for an investment or portfolio and its benchmark, tracking error is calculated as follows:
Tracking Error = Standard Deviation of (P – B)
Where P is portfolio return and B is benchmark return.
Difference between Mutual Funds and Exchange traded Funds
Source: https://turbo-tax.org/etf-vs-mutual-fund/
Index Fund
An index fund is a mutual fund or exchange-traded fund designed to follow certain pre-set rules so that the fund can track a specified basket of underlying investments.
An index fund is a type of mutual fund or exchange-traded fund (ETF) with a portfolio constructed to match or track the components of a financial market index, such as the Standard & Poor’s 500 Index (S&P 500).
Source: https://crowdfunding-platforms.com/what-to-trade-other-than-stocks
Pros and cons of Index Funds
Source: https://price2value.substack.com/p/equity-mutual-funds?s=r
How to invest in Index Funds
Source: https://www.fool.com/investing/how-to-invest/index-funds/
Types of Index Funds
Source: https://tokenist.com/investing/what-is-an-index-fund/
Difference between Mutual funds, ETFs, and Index funds
Source: https://www.sarwa.co/blog/what-is-an-etf
Conclusion
Mutual funds, ETFs and Index funds are always subject to market risk. So, please make sure you read the terms and conditions well before you pool your investment portfolio.
I have given the trading parts in infographics as I felt it will be easier to understand than through paragraphs.
Hope you enjoyed this blog. See you soon!!!