What are the kinds of financial goals I can fulfill with Mutual Funds?

What are the kinds of financial goals I can fulfill with Mutual Funds?
The best part about Mutual Funds is that no matter what your financial goal is, you can find an appropriate scheme for it.

So if you have a long term financial goal like planning for your retirement or your child’s future education than equity funds could be a choice to consider

If your endeavour is to potentially generate regular income, a fixed income fund could be considered.

You may have suddenly received a windfall of money and are yet to decide where you wish to invest, you can consider a liquid fund. A liquid fund is a good substitute to consider for a savings account or even a current account to park your working capital.

Mutual funds also offer investment options for saving tax. Equity Linked saving Schemes (ELSS) are specifically designed to do the same

Mutual Funds are a one-stop shop for practically all investment needs.

Long term. Short term. Your choice... 

Are Mutual Funds ideal for short term or long term?

“Mutual Funds could be a good saving tool for short term.”

“You must be patient with your Mutual Fund investments. It takes time to deliver results.”

People regularly come across both the above statements, which are clearly contradictory.

So what period are Mutual Funds suitable for? Short term or long term?

Well, that depends on what one’s investment goals are, and most goals are driven by time. There are schemes suitable for short periods, there are several schemes suitable for longer horizon, and then, there are schemes for any period in-between.

Consult your Mutual Fund distributor or your investment advisor, discuss your financial goals, and then decide where you want to invest. For example;

1. Equity-oriented Mutual Funds- Look for longer periods, typically 5 years and above.

2. Fixed Income oriented Mutual Funds-

1. Liquid Funds - For very short term – Less than 1 year

2. Short Term Bond Funds – For the medium term – 1 to 3 years.

3. Long Term Bond Funds - For the long term – 3 years or more

As you explore our website, you will know more about the various kinds of Mutual Funds too. So, trust the expertise of your advisor, know your goals, and invest!

Won’t I need a large amount to invest in Mutual Funds?

Won’t I need a large amount to invest in Mutual Funds?

People think that Mutual Funds are elite investments made only for the wealthy. The fact is: one does not need large sum to invest in Mutual Funds, you can start with a sum as low as ₹ 500, or 5000 depending on the kind of fund you choose.

Why keep the minimum amounts as low as these?

The economies of scale can be understood easily if we look at travelling by an airplane. The plane would cost a lot of money and, of course, not everybody owns a plane! However, we can afford air travel simply because all the costs are divided among all the passengers using the services at various different points of time.

Similarly, a person may not have enough money to create a diversified portfolio through investment in a very large number of investment avenues, one may not have enough money required to conduct or purchase research on investments. However, the economies of scale allow small investors to get multiple benefits through Mutual Funds.


Mutual Funds are thus ideal vehicles for small investors for saving and investing.

So can I invest now, for my vacation 8 months later?

So can I invest now, for my vacation 8 months later?

Articles about Mutual Funds are usually written for planning to achieve certain long term specific goals, and investors assume that other goals, especially short term cannot be achieved.

Let us break this myth with an example.

Ramesh, a travel junkie got to satisfy his wanderlust, when the company he worked for achieved success and rewarded its employees with bonuses.

With his bonus Ramesh decided to go on a Europe trip, but his work on a big and prestigious project was incomplete and approaching its deadline. The project would end in the next eight months.

The exact date of Ramesh’s trip is yet to be finalized. Looking at his expenses- some money needs to be spent before and some during the trip. Uncertainty regarding the exact dates on which how much money is to be paid is there.

Certain Mutual Fund schemes are ideal for such cases.

Ideally Ramesh should park these savings into a liquid fund to take them out on any working day. Money will be in his account the day after he submits a request for withdrawal. Ramesh can even request for withdrawal through an SMS or App.

Planning for even short term goals becomes convenient with this.

How often can I remove my money?

How often can I remove my money?
An investor has no restriction on redeeming money from an open ended scheme. While there may be an exit load in certain cases, which impacts final amount realised, all open end schemes offer liquidity as a great benefit.

The decision to redeem is totally at investor’s discretion. There are no restrictions on the number of redemptions, or on the amount to be redeemed. There have to be sufficient units in the account to fund redemptions. Scheme documents usually indicate minimum amount that can be redeemed.

Units under lien to a bank or institution cannot be redeemed, unless the lien is removed. Redemptions may be restricted only under extraordinary circumstances, as decided by the Board of Trustees.

Closed end schemes may be redeemed from the AMC only on maturity. However, they do provide a route to liquidity – any time before maturity - by selling units in a recognised exchange.

Redemptions can be made at;

· Investor Service Centres (ISCs)

· AMC offices

· Official Points of Acceptance of Transaction (OPAT)

· Through an authorised on-line platform.

How soon can I withdraw my money from Mutual Funds?

How soon can I withdraw my money from Mutual Funds?
Mutual Funds are one of the most liquid assets, i.e. it is one of the easiest to convert into cash. In order to redeem funds through offline mode, the unit holder needs to submit a signed Redemption Request form to the AMC's or the Registrar’s designated office. The form requires details like unit holder’s name, folio number, scheme name, and number of units to redeem. The proceeds from the redemption will be credited to the registered bank account of the first named unit holder.
Mutual Funds can also be purchased and redeemed on the concerned fund’s website. You simply have to log-on to the ‘Online Transaction’ page of the desired Mutual Fund and log-in using your Folio Number and/or the PAN, select the Scheme and the number of units (or the amount) you wish to redeem and confirm your transaction.
In addition, registrars like CAMS (Computer Age Management Services Pvt. Ltd.), Karvy, etc. offer the option of redeeming Mutual Fund bought from several AMCs. You can download the form online or visit the nearest office. Please note that these agencies might not service all the AMCs.

How do I withdraw my money from Mutual Funds?

How do I withdraw my money from Mutual Funds?
One of the biggest advantages of Mutual Funds is liquidity – the ease of converting an investor’s units into cash.Mutual Funds, being regulated by Securities and Exchange Board of India (SEBI), have well laid out norms to ensure liquidity. Open end schemes, which comprise of a large majority of schemes, offer liquidity as a major feature. Liquidity is ease of access or conversion of an asset into cash. Once the redemption is complete, funds are transferred to the designated bank account of the investor, within 3 business days after the redemption was lodged.
However two issues need to be kept in mind. One, there may be an exit load period in certain schemes. In such cases, redemptions before a certain specified period, say 3 months, may attract a nominal load like 0.5% of Asset Value. Fund Managers impose such loads to deter short term investors. Secondly, AMCs may indicate what the minimum amount for redemption is. Investors are advised to read all scheme related documents carefully before investing.

When can I withdraw my investment?

When can I withdraw my investment?

An investment in an open end scheme can be redeemed at any time. Unless it is an investment in an Equity Linked Savings Scheme (ELSS), wherein there is a lock-in of 3 years from date of investment, there are no restrictions on investment redemption.

Investors need to keep in mind any applicable exit load on their investment. Exit loads are charges deducted at the time of redemption, only if applicable. AMCs usually impose an exit load to deter short term or speculative investors from entering a scheme.

Closed end schemes do not offer this, as all units are automatically redeemed on the date of maturity. However, units of closed end schemes are listed at a recognised stock exchange, and investors can sell their units to others only through the exchange.

Mutual funds are one of the most liquid investment avenues in India, and are an ideal asset class for every financial plan.

How can one track a Mutual Fund performance?

How can one track a Mutual Fund performance?

In this digital and information age, it has become relatively easy to keep track of investment and portfolio performance. While advisors are irreplaceable partners in your financial journey, it is best for investors to have a little knowledge about their own investments. Don’t worry, you don’t have to sit with mind-boggling spread-sheets and graphs.

Anyone who has invested through an advisor or intermediary usually gets updates and review statements that track portfolio and scheme performance. Even in the absence of such statements, there are several websites and mobile apps that keep track of scheme performance. Some such sites can be customised to track a particular portfolio. Popular business papers also regularly review and comment on Mutual Funds.

Additionally, you can track your investments using Fund Fact Sheet. It is a basic one-page document that gives an overview of a Mutual Fund scheme with special emphasis on disclosure of scheme performance and portfolio and is published every month by each Mutual Fund. It is like a report card that indicates the health of the scheme.
The infographic on the left shows you what a Fact Sheet contains.

Can Mutual Funds help create wealth?

Business and commerce allows us to create wealth by investing our money with those who are on the path to creating wealth. We can be investors in businesses of entrepreneurs, by investing in stocks of various companies. As the entrepreneurs and the managers run their businesses efficiently and profitably, the shareholders get the benefits. In this regard, Mutual Funds are a great way to build wealth.

But how do we know which stocks to buy, and when?

That is where taking professional help counts. They also take the advantage of a large corpus to explore more opportunities simultaneously. Like a balanced diet – we all need proteins, vitamins, carbohydrates, etc. Eating only one type results in some nutrient deficiency. Similarly, in a diversified equity fund you’re exposed to different segments of the economy, and also protected from the potential downside.

Invest in a professionally managed, diversified equity fund and stay invested for long period to create wealth for yourself and your next generation.

What is the co-relation between risk and return?

What is the co-relation between risk and return?
In Mutual Funds, one often hears, ‘more the risk, more the return’. Is there truth in this?
If ‘risk’ is measured as either, probability of loss of capital or as swings and fluctuations in investment value, then asset classes like equity are undoubtedly the riskiest, and money in a savings bank account or in a government bond is of course least risky.
In the Mutual Fund universe, a liquid fund is least risky and an equity fund is most risky.
So, the only reason to invest in equity would be an expectation of higher reward. However, higher returns come to those who invest in equity after careful study and adopting a patient, long term time horizon. In fact, risk in equity can be mitigated by adopting diversification as well having a longer term time horizon
Every category of mutual fund schemes have different types of risks – credit risk, interest rate risk, liquidity risk, market/price risk, business risk, event risk, regulatory risk, etc. Your investment advisor and fund manager’s expertise, and diversification, can help mitigate them.

Are there funds that need me to stay invested for a stipulated time?

Are there funds that need me to stay invested for a stipulated time?
One of the biggest advantages in a Mutual Fund scheme is Liquidity, i.e. ease of converting investment into cash.

Equity Linked Savings Schemes (ELSS), which offer tax benefits under Sec 80C, are required by regulation to ‘lock-in’ units for a period of 3 years, after which, they are free to be redeemed.

There is another category of schemes popularly called as “Fixed Maturity Plans” (FMP’s) where investors need to stay invested for a stipulated period which is pre-defined in the offer document of the scheme. These schemes have an investment duration of anywhere between three months to a few years.

A few open end schemes may however, specify an exit load period. For instance, a scheme may specify that units redeemed with 6 months would attract an exit load of 0.50% at applicable NAV.

One should bear in mind that while there be may some rules and regulations on minimum time horizon, it is best to take the advice of an investment advisor to know the appropriate or ideal time horizons for every type of schemes.

How can one track a Mutual Fund performance?

How can one track a Mutual Fund performance?

In this digital and information age, it has become relatively easy to keep track of investment and portfolio performance. While advisors are irreplaceable partners in your financial journey, it is best for investors to have a little knowledge about their own investments. Don’t worry, you don’t have to sit with mind-boggling spread-sheets and graphs.

Anyone who has invested through an advisor or intermediary usually gets updates and review statements that track portfolio and scheme performance. Even in the absence of such statements, there are several websites and mobile apps that keep track of scheme performance. Some such sites can be customised to track a particular portfolio. Popular business papers also regularly review and comment on Mutual Funds.

Additionally, you can track your investments using Fund Fact Sheet. It is a basic one-page document that gives an overview of a Mutual Fund scheme with special emphasis on disclosure of scheme performance and portfolio and is published every month by each Mutual Fund. It is like a report card that indicates the health of the scheme.

The infographic on the left shows you what a Fact Sheet contains.

Why don't Mutual Funds give a fixed rate of return like a saving account or FD?

Why don't Mutual Funds give a fixed rate of return like a saving account or FD?
The returns in a Mutual Fund portfolio are a function of many things, like the avenues one has invested in, the way various markets move, the ability of the fund management team, and the investment period.

Since many of these factors are uncertain, the returns cannot be guaranteed, unlike a fixed deposit where these factors are absent, at least to some extent.

With a fixed deposit – the returns are FIXED only for a FIXED period. These returns and the period, both are decided by the issuer company and not by the depositor. Hence, if one wants to invest money for six years and a deposit is available for five years, the returns are known only for the first five years, but not for the entire six-year period. Thus, the investment returns are known only in case of guaranteed return products, where the product maturity and investor’s time horizon are matching perfectly.In all other cases, the investment returns are unknown over the investor’s investment horizon.

₹ 500 se toh sirf shuruwaat hai

₹ 500 se toh sirf shuruwaat hai

You can start investing in Mutual Funds with just ₹ 500 a month!.
People feel that to earn meaningful returns, large sums must be invested in Mutual Funds. Well, you can start by investing as little as ₹500 per month and gradually increase your investment as your income rises.
Check out the table below to understand how your investments can grow at different rate of returns.

*This is strictly as an example. The returns shown in the table are purely hypothetical and for illustration purpose only. Mutual Funds do not offer any assured rate of return. 

Mutual Funds are meant for everyone from the Aam Aadmi to the Bada Aadmi (a common man to high net worth individual). There are three mantras to help the small saver aim for a larger goal:

a. Start early - even with a small amount

b. Invest regularly - no matter how small the amount

c. Stay invested for a long term - to give your investments the opportunity to grow

Mutual Funds have evolved to suit every kind of investor over time. Even if the investment amount is low, regular investments and a disciplined approach can help you build a large corpus over time.

How do I start/stop a SIP? What happens if I miss an instalment?

How do I start/stop a SIP? What happens if I miss an instalment?

Before you make any Mutual Fund investment, you need to complete a KYC process. This is done through submission of certain documents as proof of identity and proof of address. The process of starting or stopping an SIP is extremely convenient and easy. How to start an SIP is explained in the graphics on the left.

What happens when you skip an installment or two?

SIP is just a convenient mode of investing and not a contractual obligation, there is no penalty even if you miss an installment or two. At most, the Mutual Fund Company would stop the SIP, which means further installments would not get debited from your bank account. At the same time, you can always start another SIP, even in the same folio, even after the earlier SIP was stopped. Please keep in mind, this would be treated as a fresh SIP and hence there could be some time taken to set up the SIP all over again.

Consult with a financial advisor today and start enjoying the benefits of Mutual Funds!

What is SIP?

What is SIP?
Systematic Investment Plan (SIP) is an investment route offered by Mutual Funds wherein one can invest a fixed amount in a Mutual Fund scheme at regular intervals– say once a month or once a quarter, instead of making a lump-sum investment. The installment amount could be as little as INR 500 a month and is similar to a recurring deposit. It’s convenient as you can give your bank standing instructions to debit the amount every month.
SIP has been gaining popularity among Indian MF investors, as it helps in investing in a disciplined manner without worrying about market volatility and timing the market. Systematic Investment Plans offered by Mutual Funds are easily the best way to enter the world of investments for the long term. It is very important to invest for the long-term, which means that you should start investing early, in order to maximize the end returns. So your mantra should be - Start Early, Invest Regularly to get the best out of your investments.

How long does one need to stay invested in a Mutual Fund?

How long does one need to stay invested in a Mutual Fund?

One of the most important considerations before choosing an investment avenue is the expected “time horizon”, i.e. time in days, months or years that an investor intends to stay invested.

And why is this so important?

All investments should ideally result from a financial or investment plan. Such plans usually indicate how long it would take for a financial objective to be met.

Let’s consider an investor who just made ₹ 50 lacs in a real estate transaction. He is looking for a safe avenue to invest, before he takes a final decision on what to do with that money. An ideal scheme in this case would be a Liquid Fund, which is designed to provide liquidity with generally a high probability for capital protection. He can redeem whenever he has made up his mind.

Therefore, the decision on how long one needs to stay invested, depends on investment objective. Investors need to periodically review investment status and progress, with their advisors. During such reviews, decisions to redeem, switch, invest or leave alone are usually made.

What returns can I expect with only ₹ 500?

What returns can I expect with only ₹ 500?

Whether one invests ₹ 500 or ₹ 5 crores, the returns are the same. Confused?

Not if you consider the returns on a percentage basis. For example, if a scheme has returns of 12% per annum, then an investment of ₹ 500 would grow to ₹ 627.20 in two years. An investment of ₹ 100,000 in the same scheme would be ₹ 1,25,440 during the same period. While the rate of appreciation is the same in both cases, only the final amounts differ because of difference in initial investments.

We need to bear two things in mind here. Returns in percentage terms is the same for any amount invested. However, a larger amount invested at the start would result in larger absolute gains.

All of this should not distract an investor from making a start. That is the most important act in investing.

Mutual Funds vs Shares: What’s the difference?

Mutual Funds vs Shares: What’s the difference?

From where do you get the vegetables for dinner? Do you grow them in your backyard, or purchase it from the nearest mandi/supermarket depending on what you need? Growing your own veggies is a great way of eating healthy food, but effort is spent on seed selection, manuring, watering, pest control, etc. The latter option allows you to choose from a wide variety without the hard work.

Similarly, you can create wealth by investing directly in shares of good companies or invest in them through Mutual Funds. Wealth can be created when we buy company stocks which use our money to grow their business, creating value for us.

Direct investment in shares carries a relatively higher risk element. You need to pick stocks by researching the company and sector. It’s a humongous task to choose few companies from thousands of them listed on the stock exchange. Once done, you need to keep a track of every stock's performance.

In Mutual Funds, the stock picking is done by expert fund managers. You need to keep track of the performance of the fund and not individual stocks within the fund. They also allow investment flexibility unlike stocks, with growth/dividend options, top-ups, systematic withdrawals/transfer, etc. besides helping to ride over volatility by investing smaller amounts regularly through SIPs.

Are all Mutual Funds risky?

Are all Mutual Funds risky?

Every investment we make involves a risk, only its nature and degree varies. The same applies to Mutual Funds too

All Mutual Fund schemes do not carry the same risk when it comes to returns on investment.

Equity schemes have the potential to deliver superior returns over the long term that can create wealth. Remember, inflation is a risk, and equities are the best asset class to beat inflation. So, in a sense, there are some risks that are worth taking.

On the other hand, the risk associated with liquid funds is significantly low when compared to equity funds. A liquid fund focuses on the protection of capital by taking lower risk and generating returns in line with the risk taken.

It is also important to remember that the risk on returns is not the only risk you need to consider. There are other risks – liquidity risk for instance. Liquidity risk measures the ease in converting your investment into cash. This risk is lowest in Mutual Funds.

In the end, the nature and extent of risk is best understood through proper understanding and evaluation of the scheme and by taking the guidance of a Mutual Fund distributor or an investment advisor.

Do I need to understand stock, bond or money markets before I invest?

Do I need to understand stock, bond or money markets before I invest?
Imagine you have to fly to a country far away and a plane is the only choice.
Under what circumstances do you need to understand the various controls for flying the plane? Or the various signals that the pilot receives from the different control towers? Or how to operate the radio system?
Not unless you’re a pilot or co-pilot. If you are just a passenger, you only need to understand is whether your need is being served, and for that you need to understand what you need in the first place.
In the context of investing, when you are managing your investments yourself, you need to understand the stock, bond and money markets. However, if you decide to use the Mutual Funds for the purpose of investing to reach your financial goals, you need not understand how stocks, bond and money markets work. You only need to know what kind of Mutual Funds serve various purposes.
Use Mutual Funds and let an expert fund management team take over the various controls of the vehicle. You just select the vehicle based on your journey and relax.

Do Mutual Funds invest only in stocks?
Do you visualize roller-coasters or toy trains first when you think of an amusement park? Probably the former. These rides are usually the biggest attractions in such parks which create a certain perception about amusement parks. ‘Mutual funds’ too carry a similar perception that they invest only in stocks and hence are risky. There are many types of Mutual Funds meant for the varying investment needs of people. Some investors want high returns which only stocks can deliver. Such investors can invest in Equity Mutual Funds which are among the best long-term investment options available for achieving such objectives. But these Mutual Funds have risk of higher volatility because of their exposure to stocks of various companies.

There are other types of Mutual Funds that do not invest in equity but in bonds issued by banks, companies, government bodies and money market instruments (bank CDs, T-bills, Commercial Papers,) which have lower risk but also offer lower returns compared to equity funds. These funds are better suited as alternatives to traditional options like bank fixed deposits or PPFs. Hence if you are looking to invest your money that can give you better returns than a bank or post office FDs and still be more tax efficient, Debt Mutual Funds are a great way to achieve such financial goals.

Do Mutual Funds issue a passbook?
While banks and certain small savings schemes issue a passbook, Mutual Funds do not issue a passbook, they issue an Account Statement instead. The main purpose of a passbook is to keep track of all transactions with a bank: deposit, withdrawals, credit of interest etc. In a Mutual Fund scheme too, similar transactions could be there: purchase, redemptions, switches, reinvestment of dividend etc. In a Mutual Fund scheme, such transactions are captured in the account statement.

An account statement is issued after the first investment in a scheme is made. The account statement would reflect all relevant details: Investor name, address, details of joint holding, amount invested, NAV details, units allotted etc. Every time a new transaction is made, the account statement would be updated and a copy is mailed to the investor. In this digital era, many investors opt for e-statements, which is more convenient way to read, access and store information.

Investors can at any time access and avail a duplicate account statement by contacting the Asset Management Companies (AMC) or its Registrar. The scheme account statement thus plays the role of a passbook.

What is the benefit of staying invested in the long term?

Invest for long term – an advice routinely given by many Mutual Fund distributors and investment advisors. This is especially true in case of certain Mutual Funds – such as equity and balanced funds.

Let us understand why the professionals give such advice. What really happens in the long term? Is there a benefit of staying invested for long term?

Consider your Mutual Fund investment as a good quality batsman. Every good quality batsman has a certain style of batting. However, each good quality batsman would be able to accumulate lots of runs, if he continues to play for years.

We are talking about the record of a “good quality” batsman. Every good batsman would go through some good and poor performances. On average the record would be impressive.

Similarly, a good Mutual Fund would also go through some ups and downs – often due to factors beyond the control of the fund manager. An investor would benefit if one stays invested through these funds for long periods of time.

So, as long as you can afford, stay invested for long periods of time – especially in equity and balanced funds.

Why invest through Mutual Funds & not directly in stocks or bonds?

Yes, it is “through” Mutual Funds and not “in” Mutual Funds. What is the difference?
You may indulge in buying and selling stocks and bonds once in a while, but taking help from Mutual Funds to manage your investments may be a much better idea.
When you invest through Mutual Funds, you invest in stocks, bonds or other investments indirectly with the help of professional managers. Instead of doing the tasks yourself, you pay a small fee and avail the services of a fund management company. These services include not just research, selection and buying-selling of various investments, for which a fund manager is well qualified, but also the accounting and administrative activities related to the task of investing, which many may not like to do themselves.

Money doesn’t get locked up. It gets invested!

Money doesn’t get locked up. It gets invested!

In Mutual Funds, money doesn’t get locked up. It gets invested!
When investing in Mutual Funds, one of the most common questions is, ‘Does my money get locked up?’

It is important to note two facts:
a. In a Mutual Fund scheme, the money is Invested and not Locked, and the money always stays yours. It is simply being managed by a professional fund manager.
b. Your money is always easily accessible. The structure of a Mutual Fund ensures that there is flexibility in accessing it. You may redeem your investment either partially or entirely. You can even pre-specify the redemption dates, by giving standing instructions to the Mutual Fund company to transfer a fixed amount into your bank account on a specified date every month or every quarter, as you choose. You can also choose to transfer your investment from one Mutual Fund scheme to another managed by the same Mutual Fund company. And you always get a comprehensive /easy to understand account statement that neatly documents it.

Go ahead and invest in a Mutual Fund scheme of your choice and enjoy the flexibility, transparency and liquidity. In other words, a superior investing experience, while being in the care of professional managers.

Why invest in gold funds when we can invest in gold?

Why invest in gold funds when we can invest in gold?

A Gold ETF is an exchange-traded fund (ETF) that aims to track the domestic physical gold price. They are passive investment instruments that are based on gold prices and invest in gold bullion. In India, Gold is usually held in ornament form, which has a certain making and wastage component (usually more than 10% of bill value). This is eliminated when investing in a Gold Fund.

Buying gold ETFs means you are purchasing gold in an electronic form. You can buy and sell gold ETFs just as you would trade in stocks. When you actually redeem Gold ETF, you don’t get physical gold, but receive the cash equivalent. Trading of gold ETFs takes place through a dematerialised account (Demat) and a broker, which makes it an extremely convenient way of electronically investing in gold.

Because of its direct gold pricing, there is a complete transparency on the holdings of a Gold ETF. Further due to its unique structure and creation mechanism, the ETFs have much lower expenses as compared to physical gold investments.

Why should one invest in Mutual Funds?

Why should one invest in Mutual Funds?

One should never invest in Mutual Funds, but should invest through them.
To elaborate, we invest in various investment avenues based on our requirements, e.g. for capital growth - we invest in equity shares, for safety of capital and regular income - we buy fixed income products.

The concern for most investors is: how to know which instruments are best for them? One may not have enough abilities, time or interest to conduct the research.

To manage investments, one can outsource certain tasks one is unable to do. Anyone can outsource ‘managing one’s investments’ to a professional firm – the Mutual Fund company. Mutual Funds offer various avenues to fulfill different objectives, which investors can choose from based on one’s unique situation and objective.

Mutual Fund companies manage all administrative activities including paperwork. They also facilitate accounting and reporting the progress of the investment portfolios through a combination of Net Asset Values (NAVs) and the account statements.

Mutual Fund is a great convenience for those who need to invest their money for future requirements. A team of professionals manages the money and the investors can enjoy the fruits of this expertise without getting involved in the mundane tasks.

How do I choose a Mutual Fund?

How do I choose a Mutual Fund?

Imagine asking a travel agent, “How should I choose my mode of transport?” The first thing he/she will say is, “Depends on where you want to go.” If I were to travel to a distance of 5 kms, an auto rickshaw might be the best option, while for a journey from New Delhi to Kochi, a flight might be the best. A flight would not be available for a short distance and an auto rickshaw would be highly uncomfortable and slow for a long-distance journey.

In Mutual Funds too, the starting point must be- What are your requirements?

It begins with your financial goals and risk appetite.

You’ve got to identify your financial goals, first. Some Mutual Fund schemes are suitable for short term requirements or goals, whereas some might be better for long term goals.

Next comes your risk appetite. Different people would have different risk appetite. Even husband and wife may have joint finances but different risk profiles. Some are comfortable with high risk products, whereas some are just not.

You can get help from financial planners or investment advisers or Mutual Fund distributors to assess your risk appetite

What is KYC Process?

What is KYC Process?

KYC is an acronym for "Know Your Customer" and is a term used for Customer Identification Process as a part of Account Opening process with any financial entity. KYC establishes an investor’s identity & address through relevant supporting documents such as prescribed photo id (e.g., PAN card, Aadhar card) and address proof and In-Person Verification (IPV). KYC compliance is mandatory under the Prevention of Money Laundering Act, 2002 and Rules framed there under, read with the SEBI Master Circular on Anti Money Laundering (AML) Standards/ Combating the Financing of Terrorism (CFT) /Obligations of Securities Market Intermediaries.

A Know Your Customer (KYC) is generally divided in 2 parts:

Part I contains the basic and uniform KYC details of the investor as prescribed by the Central KYC registry (Uniform KYC) to be used by all registered financial intermediaries and

Part II additional KYC information as may be sought separately by the financial intermediary such as a Mutual Fund, stock broker, depository participant opening the investor’s account (Additional KYC).

What is Net Asset value (NAV)?

What is Net Asset value (NAV)?

The performance of a particular scheme of a Mutual Fund is denoted by Net Asset Value (NAV). In simple words, NAV is the market value of the securities held by the scheme. Mutual Funds invest the money collected from investors in securities markets. Since market value of securities changes every day, NAV of a scheme also varies on day to day basis. The NAV per unit is the market value of securities of a scheme divided by the total number of units of the scheme on any particular date.

The video on the left explains how NAV is calculated.

The NAVs of all Mutual Fund schemes are declared at the end of the trading day after markets are closed, in accordance with SEBI Mutual Fund Regulations.

How will I evaluate my risk profile?

How will I evaluate my risk profile?

Every individual investor is unique. Not only with regards to investment objectives but even in approach and view of risk. This is what makes Risk Profiling absolutely crucial before investing.
A Risk Profiler is essentially a questionnaire that seeks an investor’s answers to questions about both “ability” and “willingness”.
It is highly recommended that investors contact their Mutual Fund distributor or an investment advisor to complete this task and get to know their Risk Profile.

What is the risk of investing in Mutual Funds?

We have all heard: “Mutual Fund investments are subject to market risks.” Ever wondered what are these risks?

Not all risks impact all the fund schemes. The Scheme Information Document (SID) helps understand which risks apply to your selected scheme.

So how does the fund management team manage these risks?

It all depends on what type of investments the Mutual Fund has invested in. Certain securities are more sensitive to certain risks and some are exposed to some other.

Professional help, diversification and SEBI’s regulations help mitigate risks in Mutual Funds.

Finally, and the most important question that many investors have asked: Can a Mutual Fund company run away with my money? This is just not possible given the structure of Mutual Funds as well as the strong regulations.


Diversify risk, for potential rewards

Risks could be controlled. And Mutual Funds can be rewarding!
When we say “RISK” in investments, a few questions immediately arise in the mind of the investor… “Is my money safe?” ”How much return will I get?” “Will I get my money back when I want it?”… While, all these are very valid questions, let’s look at them from three angles to understand Mutual Funds better

Professional Fund Management - Mutual funds are managed by professional fund managers and as an investor, you benefit from their research and expertise. While this may not completely eliminate risk, it certainly lowers it.

Diversification – Mutual Funds invest in a basket of securities. Diversification helps in minimizing the risk from a specific security’s under-performance.

Select a Scheme In Line With Your Investment Objective - If the time horizon of the investment is in sync with the fund selected, you protect yourself from very short term fluctuations. For example, if you have invested in an Equity Fund, you may be affected by short term fluctuations, but over a longer term, you would be more likely to get the long term returns associated with equities.

Most people believe that Mutual Funds are risky possibly because of the standard disclaimer they come across in the Mutual Fund advertisements. It’s important to remember that the stringent regulations that ensure investor protection, professional fund management and diversification mitigate it to a large extent.

What are Liquid Funds?

What are Liquid Funds?

On watching the video on the left, you will notice that in all the situations, the money is lying idle for a short period of time. In certain cases, the exact time when the money needs to be taken out may not be known. What does the investor do? Where should the money be parked?

One must consider a few things here:

1. The money is parked for a short period of time

2. One would prefer that there is no drop in investment value

3. Even low returns should be fine, if it means the money is safe

4. The period may not be fixed or even known

Given the above four conditions, putting money in a fixed deposit may serve the purpose, but only to a limited extent. One of the big benefits of a fixed deposit is the safety. At the same time, one of the limitations is often ignored – the money can be parked for a fixed period only – there is no flexibility regarding the period of parking.

That is where liquid mutual funds could be considered. As is conveyed in the video too, they offer safety, reasonably good returns (in comparison to savings accounts or even very short term fixed deposits) and full flexibility of redemption any time.
What are Debt Funds?

A debt fund is a Mutual Fund scheme that invests in fixed income instruments, such as Corporate and Government Bonds, corporate debt securities, and money market instruments etc. that offer capital appreciation. Debt funds are also referred to as Fixed Income Funds or Bond Funds.

A few major advantages of investing in debt funds are low cost structure, relatively stable returns, relatively high liquidity and reasonable safety.

Debt funds are ideal for investors who aim for regular income, but are risk-averse. Debt funds are less volatile and, hence, are less risky than equity funds. If you have been saving in traditional fixed income products like Bank Deposits, and looking for steady returns with low volatility, debt Mutual Funds could be a better option, as they help you achieve your financial goals in a more tax efficient manner and therefore earn better returns.

In terms of operation, debt funds are not entirely different from other Mutual Fund schemes. However, in terms of safety of capital, they score higher than equity Mutual Funds.


What is a Hybrid Fund?

Our choice of meals when we dine depend largely on the time at hand, the occasion and of course, our mood. If we’re in a hurry, say during an office lunch or eating before boarding a bus/train, we may opt for a combo meal. Or if we know a combo meal is famous, we may not bother to go through the menu. A leisurely meal would mean ordering individual items from the menu, as many as we’d like.

Similarly, an investor in a Mutual Fund can select and invest individually in various schemes, e.g. equity fund , debt fund , gold fund , liquid fund , etc. At the same time, there are schemes like a combo meal – known as hybrid schemes. These hybrid schemes, earlier known as Balanced Funds, invest in two or more asset categories so that the investor can avail the benefit of both. There are various types of hybrid funds in the Indian Mutual Fund industry. There are schemes that invest in two assets, viz., equity and debt, or debt and gold. There are also schemes that invest in equity, debt and gold. However, most of the popular hybrid schemes invest in equity and debt assets.
Different types of hybrid funds follow different asset allocation strategies. Remember to have your objectives clear before you invest.

What is an ELSS?

An ELSS is an Equity Linked Savings Scheme, that allows an individual or HUF a deduction from total income of up to Rs. 1.5 lacs under Sec 80C of Income Tax Act 1961.
Thus if an investor was to invest Rs. 50,000 in an ELSS, then this amount would be deducted from the total taxable income, thus reducing her tax burden.
These schemes have a lock-in period of three years from date of units allotment. After the lock-in period is over, the units are free to be redeemed or switched. ELSS offer both growth and dividend options. Investors can also invest through Systematic Investment Plans (SIP), and investments up to ₹ 1.5 lakhs, made in a financial year are eligible for tax deduction


What is an ETF?
An ETF is an Exchange Traded Fund, which unlike regular Mutual Funds trades like a common stock on a stock exchange.

The units of an ETF are usually bought and sold through a registered broker of a recognised stock exchange. The units of an ETF are listed in stock exchanges and the NAV varies as per market movements. Since units of an ETF are listed in the stock exchange only, they are not bought and sold like any normal open end equity fund. An investor can buy as many units as she wishes without any restriction through the exchange.

In the simple terms, ETFs are funds that track indexes such as CNX Nifty or BSE Sensex, etc. When you buy shares/units of an ETF, you are buying shares/units of a portfolio that tracks the yield and return of its native index. The main difference between ETFs and other types of index funds is that ETFs don't try to outperform their corresponding index, but simply replicate the performance of the Index. They don't try to beat the market, they try to be the market.

ETFs typically have higher daily liquidity and lower fees than Mutual Fund schemes, making them an attractive alternative for individual investors.


What are Equity Funds?

An Equity Fund is a Mutual Fund Scheme that invests predominantly in shares/stocks of companies. They are also known as Growth Funds.

Equity Funds are either Active or Passive. In an Active Fund, a fund manager scans the market, conducts research on companies, examines performance and looks for the best stocks to invest. In a Passive Fund, the fund manager builds a portfolio that mirrors a popular market index, say Sensex or Nifty Fifty.

Furthermore, Equity Funds can also be divided as per Market Capitalisation, i.e. how much the capital market values an entire company’s equity. There can be Large Cap, Mid Cap, Small or Micro Cap Funds.

Also there can be a further classification as Diversified or Sectoral / Thematic. In the former, the scheme invests in stocks across the entire market spectrum, while in the latter it is restricted to only a particular sector or theme, say, Infotech or Infrastructure.

Thus, an equity fund essentially invests in company shares, and aims to provide the benefit of professional management and diversification to ordinary investors.

Why is investing better than saving?

Why is investing better than saving?

Imagine a 50-overs cricket match in which #6 batsman walks in to bat only in the 5th over. His job is to first ensure he does not lose the wicket, and then focus on scoring runs.
While saving is a must for investing, it is important to save one’s wicket in order to be able to score later. One can save the wicket by playing defensive cricket and avoiding all sorts of shots. But that would result in a very low score. He would need to hit some boundaries by taking certain risks like lofted shots or drives between fielders or cuts and nudges.
Similarly, in order to accumulate large sums to meet one’s financial goals, in order to beat inflation, one must take certain investment risks. Investing is all about taking calculated risks and managing the same, not avoiding the risks altogether.
At the same time, in the cricket analogy, in order to stay at the crease as well as score runs, one must take calculated risks and not play rash shots. Taking unnecessary risks is a bad strategy.
So while saving is necessary, investing is very important to achieve long term goals
What is the ideal amount to start investing in a mutual fund?
Several questions rest in a potential investor’s mind regarding the ideal amount to invest. People consider Mutual Funds as just another investment avenue. Is it really the case? Is a Mutual Fund just another investment avenue like a fixed deposit, debenture or shares of companies?
A Mutual Fund is not an investment avenue, but a vehicle to access various investment avenues.
Think of it this way. When you go to a restaurant, you have a choice to order a la carte or buffet/thali or a full meal.
Compare the full thali or the meal with a Mutual Fund, whereas individual items you order are the stocks, bonds, etc. A thali makes the choice easy, saves time and also some money.

The important thing is to start investment early, even if small, and gradually add on to your investments as your earnings increase. This gives you better prospects of better returns in the long run.

What is the benefit of staying invested in the long term?
Invest for long term – an advice routinely given by many Mutual Fund distributors and investment advisors. This is especially true in case of certain Mutual Funds – such as equity and balanced funds.
Let us understand why the professionals give such advice. What really happens in the long term? Is there a benefit of staying invested for long term?
Consider your Mutual Fund investment as a good quality batsman. Every good quality batsman has a certain style of batting. However, each good quality batsman would be able to accumulate lots of runs, if he continues to play for years.
We are talking about the record of a “good quality” batsman. Every good batsman would go through some good and poor performances. On average the record would be impressive.
Similarly, a good Mutual Fund would also go through some ups and downs – often due to factors beyond the control of the fund manager. An investor would benefit if one stays invested through these funds for long periods of time.
So, as long as you can afford, stay invested for long periods of time – especially in equity and balanced funds.Are there particular funds that help create wealth over the long term?


What is wealth? What purpose does it serve?
Many answer these questions as “living a life of one’s dreams”, or “not having to worry about money”, or “having financial freedom”. Being wealthy means having enough money to spend for one’s responsibilities and dreams.
However, for all the long term expenses, one must never forget one major factor – “Inflation”. As the name suggests, inflation is a phenomena that inflates the cost that you will incur to fulfil your life goal when the time arrives to fulfil it.

Diversified equity funds offer the opportunity to create wealth over the long term at reasonable levels of risk. The risk associated with equities gets controlled with equity Mutual Funds due to three factors

· The expertise of the professional fund manager who manages the fund

· Diversification of risks due to the investments made in a basket of securities

· Investing for the long term which lowers the impact of short term volatility

Although it’s true that equities as an asset class offer investors the opportunity to create wealth, it is important to keep in mind that equities as an asset class is volatile over shorter time frames. Therefore, you need to invest for the long term.

What are the various types of funds?

Various types of Mutual Funds exist to cater to different needs of different people. Largely, they are of three types.

1. Equity or Growth Funds

· These invest predominantly in equities i.e. shares of companies

· The primary objective is wealth creation or capital appreciation.

· They have the potential to generate higher return and are best for long term investments.

· Examples would be

· “Large Cap” funds which invest predominantly in companies that run large established business

· “Mid Cap” funds which invest in mid-sized companies.

· “Small Cap” funds that invest in small sized companies

· “Multi Cap” funds that invest in a mix of large, mid and small sized companies.

· “Sector” funds that invest in companies that are related to one type of business. For e.g. Technology funds that invest only in technology companies

· “Thematic” funds that invest in a common theme. For e.g. Infrastructure funds that invest in companies that will benefit from the growth in the infrastructure segment

· Tax-Saving Funds

2. Income or Bond or Fixed Income Funds

· These invest in Fixed Income Securities, like Government Securities or Bonds, Commercial Papers and Debentures, Bank Certificates of Deposits and Money Market instruments like Treasury Bills, Commercial Paper, etc.

· These are relatively safer investments and are suitable for Income Generation.

· Examples would be Liquid, Short Term, Floating Rate, Corporate Debt, Dynamic Bond, Gilt Funds, etc.

3. Hybrid Funds

· These invest in both Equities and Fixed Income, thus offering the best of both, Growth Potential as well as Income Generation.

· Examples would be Aggressive Balanced Funds, Conservative Balanced Funds, Pension Plans, Child Plans and Monthly Income Plans, etc.

What is a Mutual Fund? 

To many people, Mutual Funds can seem complicated or intimidating. We are going to try and simplify it for you at its very basic level. Essentially, the money pooled in by a large number of people (or investors) is what makes up a Mutual Fund. This fund is managed by a professional fund manager.

It is a trust that collects money from a number of investors who share a common investment objective. Then, it invests the money in equities, bonds, money market instruments and/or other securities. Each investor owns units, which represent a portion of the holdings of the fund. The income/gains generated from this collective investment is distributed proportionately amongst the investors after deducting certain expenses, by calculating a scheme’s “Net Asset Value or NAV. Simply put, a Mutual Fund is one of the most viable investment options for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost.


What are the benefits of investing in Mutual Funds?
Many of us dread the thought of managing our own investments. With a professional fund management company, people are put in charge of various functions based on their education, experience and skills.

As an investor, you can either manage your finances yourself, or hire a professional firm. You opt for the latter when:

1. You do not know how to do the job best – many of us hire someone to file our income tax returns, or almost all of us get an architect to do our house.

2. You do not have enough time or inclination. It’s like hiring drivers even though we know how to drive.

3. When you are likely to save money by outsourcing the job instead of doing it yourself. Like going on a journey driving your own vehicle is far costlier than taking a train.

4. You can spend your time for other activities of your choice / liking

Professional fund management is one of the best benefits of Mutual Funds. The infographic on the left highlights all the others. Given these benefits, there is no reason why one should look at any other investment avenue.

How can I start investing in Mutual Funds?
Investing in Mutual Funds requires you to complete a few basic formalities. Such formalities may either be completed directly with an Asset Management Company (AMC) at their office, or authorized point of acceptance (PoA), or through an authorized intermediary such as an advisor, banker, distributor or broker.

Prior to investing in a Mutual Fund scheme, you need to complete the Know Your Customer (KYC) process. The completed KYC form may be submitted with the scheme application form (also known as Key Information Memorandum). The application form would have to be carefully filled as it would capture important details like names of all account holders, PAN numbers, bank account details etc. This would have to be signed by all account holders. Much of these can be done through online platforms too.

New investors may take help from their advisors, to make the entire process smooth and easy. And before investing, all investors are advised to read important scheme related documents and know the risks of their scheme choice.