Fundamentals of Mutual Fund

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Fundamentals of Mutual Fund -- In general, mutual funds are defined as "a set of funds raised from the public and managed by the Investment Fund Manager in the form of investment portfolio or other financial products". Mutual funds are investment products that are designed as a means to raise funds for people who want to invest (especially in the capital market), but have limited money, time and knowledge.

Like a cars, mutual funds are many and varied kinds. If some kind of car can be produced by the  manufacturer. One manufacturer, can produce similar types of products with other manufacturers, just different brand names and product. So also with mutual funds, it can be issued by the Investment Manager in the number and type of the many and varied. For your notice,  Investment Fund Manager are not individuals, but a company namely Investment Fund Management Company (IFMC) that has obtained permission from the stock market regulator. Thus, when selecting mutual funds, we as investors should act as the consumer should choose a trusted manufacturer and the product that suits your needs.

When investing in mutual funds, investors can not control the money directly to determine where the money should be invested. Investors give full control to a third party, Investment Fund Manager. Investment Fund managers as a mutual fund manufacturer to design a wide range of products with different specifications as well as composition. Product specifications, the composition of investment, as well as anything else about the mutual fund products can be seen in the Mutual Fund Prospectus.

In general, there are four types of mutual fund products based on its investment policy: Stock Mutual Funds, Fixed Income Mutual Funds, Mix Mutual Funds and Money Market Mutual Fund. This classification uses a minimum of 80%. That is, the mutual fund has a policy of minimum 80% investment in stocks and the remainder in other instruments, including the type of mutual fund mutual fund shares, and so on. Mixed types of mutual funds have different investment portfolios combined with the previous rule, and can also vary widely. For example, a combination of 60% in stocks and 40% in bonds, money market or other instruments.

Participating Units (PU) vs Net Asset Value (NAV)
When buying mutual funds, investors will get proof of ownership of a unit is expressed in  Participating Units (PU), as well as sheet stock units or a unit of gold is expressed in grams. This unit allows us to make a deal selling / buying, as well as the nominal size as it can be converted into value for money.

In order to be converted into the value of money, PU must be multiplied by the Net Asset Value (NAV). NAV concept is basically the assets value minus its liabilities of mutual funds . Net Asset Value is dynamic, because the asset value of mutual funds consisting of stocks, bonds and money market instruments, the value is also always changing from time to time. NAV is calculated each end of the day whose value can have a look at some of the economic newspaper.
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Role of Custodian Banks
As investors, we do not have to worry if the Investment Manager will calculating the NAV arbitrarily. Therefore, the Custodian Bank calculating the market value of the asset portfolios of mutual funds.
In managing mutual funds, limited role of IFMC is only manage investment fund's assets.

IFMC does not have direct access to investor funds, because the money is stored in the Custodian Bank. So, if there is a mutual fund investor buying PU, then the investor money is transferred to the Custodian Bank account in mutual funds, as well as if a sale is back (redeem), the Custodian Bank is also paying to investors.
In addition, the Custodian Bank has a function as treasurer. In this case the Custodian Bank to settlement / payment transactions made on the purchase of investment managers of investment instruments such as stocks, bonds, etc. for the benefit of mutual funds.

Given the role of the Custodian Bank, then invenstasi in the form of mutual funds become more secure and comfortable and in favor of the interests of investors.