Mutual Funds Explained: What You Actually Own
What You Buy
When you invest in a mutual fund like FARMX, you don’t buy company shares directly — you buy units (shares) of the fund, which itself holds a diversified portfolio of stocks and bonds.
Suppose you invest $10,000 when the fund’s NAV (Net Asset Value) is $20 per unit.
You’ll receive:
$10,000 ÷ $20 = 500 fund units
If the fund reports a 5% annual return, that equals $500 profit after a year.
But how it appears depends on how the fund handles gains:
| Scenario | What Happens | Your End Value |
|---|---|---|
| 1. Reinvested return | You get 25 new units (500 + 25 = 525) while NAV stays $20 | $10,500 |
| 2. NAV grows | NAV rises to $21, you still own 500 units | $10,500 |
Both outcomes are identical in value — but no cash appears until you sell.
Selling Units
If you want to withdraw $2,000, you sell:
$2,000 ÷ $20 = 100 units
You now hold 425 units worth $8,500, and have $2,000 in cash — your realized gain.
FinImpulse Insight:
Mutual funds offer diversified growth — but profits become real only when you sell your units.
We provide the data — you decide what’s right.
