Mutual Fund

Whether you are a new investor or a veteran, a conservative investor or someone who is ready to take risks, we can help you create a portfolio of mutual fund schemes where you can get reasonably high returns, greater liquidity and tax efficiencies at low risk.                    
1.What is a Mutual Fund? How do I choose in which Mutual Fund and in which scheme to invest in? 

Answer: A mutual fund is a pool of money from numerous investors who wish to save and or make money. Investing in a mutual fund is a lot easier than buying and selling individual stocks and bonds especially for those investors who do not have much time in their hands nor the keenness to actively trade. Also, units or shares of a mutual fund can be sold at any time.

Investment is always done with an objective in mind. If your objective is long term, then equity funds are best suitedfor you and if you have short term goals then money market and debt funds are suggested. Also a lot depends on your risk appetite. After this one needs to choose the fund house in which to invest, for this it is very important to find out the process with which it investments the funds it has the custody off, the performance of their fund and their track record and the loads and recurring expenses that the fund house charges it’s investors.

This can be done by reading the Key Information and Scheme Information Document of the fund house and the scheme. However, it is recommended that you contact your investment advisor or a representative of the fund house and seek their assistance in finding the right mutual fund house and their scheme for investing.                                                

2.What are the benefits of investing in Mutual Funds?                            
Answer: Some benefits of investing in mutual funds are:

Mutual Funds are owned collectively but managed professionally by investment advisors called fund managers who are authorized to direct and allocate the fund’s investments as per the fund’s objective, such as long term growth, high current income, or stability of principal. Tasked with the job of understanding the market and it’s volatility on a regular basis, a fund manager is better equipped to track the market than a regular individual.

  • Risk is considerably reduced in Mutual Funds as the schemes invest in a diverse range of financial products.                                                            
  • Mutual Fund Investments can be redeemed at their Net Asset Value on any working day, thereby making them highly liquid investments.                                
  • Mutual Fund Investments give their investors the flexibility of investing and withdrawing the funds as per their convenience by providing features like SIPs and Dividend Investment Plans.                                                                    
  • Mutual Funds are subjected to SEBI guidelines and therefore the interest of investors is well protected.                                                                                    

3.What is a Systematic Investment Plan (SIP)?             

Answer: SIP is an investment option offered by mutual funds to investors, allowing them to invest a small sum of money at regular intervals instead of a lump sum, over a period of time. The intervals for investing in SIPs are usually monthly or quarterly. This is a good way of saving and accumulating wealth. The minimum amount of SIP allowed is Rs. 500/- per month.                                        

4.What is Net Asset Value (NAV)?      

Answer: NAV is the value per share of a mutual fund on a specific date or time. It is the per unit market value of the fund. It is calculated by dividing the total value of all the assets in a portfolio, minus all its liabilities.                                                

Net Asset Value per share = Net Asset Value (Total Assets – Intangible Assets – Liabilities)  / 
                                                      Total Outstanding Shares                                                                 

5. What is a Switch? How is it different from Purchase or Redemption?                        

Answer: Moving either the whole or part of the existing investment from one mutual fund scheme to another mutual fund scheme within the same fund house is called Switching of a Mutual Fund. Switch is possible within different schemes and or options of the same AMC.                     
Example: You have an existing investment in Reliance Regular Savings Fund – Growth Option and want to invest in Reliance Equity Opportunities Fund – Dividend Payout Option. You can fill the switch form and your exit from Reliance Regular Savings Fund- Growth Option, known as Switch Out is treated as a redemption. However, the funds are not credited into your account instead, they are automatically used to purchase equivalent units of Reliance Equity Opportunities Fund – Dividend Payout Option, known as Switch In.                                                 

6.What are entry and exit loads in mutual fund investments?

Answer: Entry and exit loads are the integral charges linked with mutual fund investments. It is the commission charged by Asset Management Companies (AMCs) to its investors for investing in mutual funds.

Entry Load is a percentage of fee levied on the purchase of a mutual fund. While SEBI banned entry loads in August 2009, nominal fees as transaction charges were allowed from August 2011 to be charged by the AMCs to the investors.

Exit Load is levied as a percentage amount when the investor wishes to redeem their mutual fund investment before the otherwise stipulated period. Exit loads are charged to discourage investors from leaving or redeeming the mutual fund schemes before holding them for a sufficient period of time.            

7.Can  Non Resident Indians invest in Mutual Funds?

Answer: Non Resident Indians can invest in Mutual Funds in India. However, there are certain restrictions for citizens of U.S.A and Canada. AMCs like HDFC, ICICI, Reliance, DSP Blackrock are currently not taking investments from US and Canadian nationals.                             
The fund houses which are accepting investments from all NRIs are:

Birla Sun Life Mutual Fund, DHFL Pramerica Mutual Fund, L&T Mutual Fund, PPFAS Mutual Fund, SBI Mutual Fund, Sundaram Mutual Fund, UTI Mutual Fund.

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