Frequently Asked Questions

A mutual fund is a type of investment vehicle that pools money from many investors to purchase a diversified portfolio of stocks, bonds, or other securities.

Mutual funds work by pooling money from many investors and using it to purchase a diversified portfolio of securities. The fund is managed by a professional investment manager who makes decisions about which securities to buy and sell based on the fund’s investment objectives.

Mutual funds offer several benefits, including diversification, professional management, liquidity, and convenience. By investing in a mutual fund, you can spread your investment across many different securities, which can help to reduce your risk. Mutual funds are also managed by professional investment managers, who have the expertise and resources to make informed investment decisions.

Mutual funds are subject to capital gains taxes when securities within the fund are sold at a profit. Investors may also be subject to taxes on dividends and interest earned by the fund. The tax treatment of mutual funds can vary depending on the type of fund and the investor’s tax situation.

When choosing a mutual fund, you should consider several factors, including the fund’s investment objectives, performance, fees and expenses, and the experience and track record of the fund’s investment manager. You should also consider your own investment goals and risk tolerance.

Mutual funds are subject to market risk, which means that the value of the fund’s investments can go up or down based on market conditions. Mutual funds are also subject to management risk, which means that the fund’s investment manager may make poor investment decisions that result in losses. Additionally, mutual funds are subject to fees and expenses, which can reduce your returns.

To invest in mutual funds, you will need to follow these steps:

Open an Online Account: If you are investing through a Registered Mutual Fund Distributor, you will need to open an online account with NSE/BSE.

Determine your investment goals and risk tolerance: Before investing in mutual funds, you should determine your investment goals and risk tolerance. This will help you select mutual funds that align with your investment objectives.

Research mutual funds: Once you have determined your investment goals and risk tolerance, you can begin researching mutual funds that align with your investment objectives. You should consider the fund’s investment objectives, performance history, fees and expenses, and the experience and track record of the fund’s investment manager.

Select mutual funds: After researching mutual funds, you can select the funds that align with your investment objectives and risk tolerance.

Invest in mutual funds: Once you have selected the mutual funds you want to invest in, you can invest in them through your online account.

It’s important to keep in mind that investing in mutual funds involves risk, and you should carefully consider your investment objectives and risk tolerance before investing. You should also consult with a Mutual Fund Distributor or tax professional to understand the tax implications of investing in mutual funds.

Net Asset Value (NAV) is the per-share value of a mutual fund. It is calculated by dividing the total value of the fund’s assets by the total number of outstanding shares.

The NAV is calculated at the end of each trading day, based on the closing prices of the securities held in the fund’s portfolio. The total value of the fund’s assets is calculated by adding up the market value of all of the securities in the portfolio, plus any cash or other assets held by the fund.

Once the total value of the fund’s assets is determined, any liabilities, such as expenses or fees owed by the fund, are subtracted from the total value of the assets. The resulting amount is then divided by the total number of outstanding shares to determine the NAV.

For example, if a mutual fund has total assets worth $1 billion and there are 100 million outstanding shares, the NAV would be $10 per share ($1 billion divided by 100 million).

Investors can use the NAV to determine the value of their mutual fund holdings. If an investor owns 1,000 shares of a mutual fund with an NAV of $10, their investment in the fund would be worth $10,000.

It’s important to note that the NAV can fluctuate based on the performance of the securities held in the fund’s portfolio and the inflows and outflows of money from the fund. Mutual funds are required by law to calculate and disclose their NAV daily.

There are several different types of mutual fund schemes, each with its own investment objectives and strategies. Some of the most common types of mutual fund schemes include:

Equity Funds: Equity funds invest primarily in stocks or equity securities. They are designed to provide investors with long-term capital appreciation and are generally considered to be high-risk investments.

Debt Funds: Debt funds invest in fixed-income securities such as government bonds, corporate bonds, and other debt instruments. They are designed to provide investors with regular income and are generally considered to be lower-risk investments than equity funds.

Money Market Funds: Money market funds invest in short-term, low-risk securities such as Treasury bills, commercial paper, and certificates of deposit. They are designed to provide investors with liquidity and capital preservation.

Balanced Funds: Balanced funds invest in a mix of stocks and bonds, typically with a predetermined asset allocation. They are designed to provide investors with both capital appreciation and income.

Index Funds: Index funds aim to track the performance of a specific market index, such as the S&P 500 or the Dow Jones Industrial Average. They are designed to provide investors with low-cost, passive exposure to a specific market.

Sector Funds: Sector funds invest in a specific sector of the economy, such as technology, healthcare, or energy. They are designed to provide investors with targeted exposure to a particular sector.

Fund of Funds: Fund of funds invests in other mutual funds rather than individual securities. They are designed to provide investors with a diversified portfolio of funds, which can help to reduce risk.

There are also several other types of mutual fund schemes, including international funds, specialty funds, and alternative funds, among others. It’s important to carefully consider the investment objectives and strategies of each mutual fund scheme before investing.

SIP stands for Systematic Investment Plan. It is a mode of investing in mutual funds in which an investor invests a fixed amount of money at regular intervals, such as monthly or quarterly.

Under SIP, the investor authorizes the mutual fund company to deduct a fixed amount from their bank account at regular intervals and invest it in the mutual fund scheme of their choice. This allows investors to invest regularly and systematically, without having to time the market or worry about short-term fluctuations in the market.

SIPs are a popular investment option for investors who want to invest in mutual funds but may not have a large lump sum of money to invest all at once. They also help investors to take advantage of rupee cost averaging, which means that the investor buys more units of the mutual fund when prices are low and fewer units when prices are high. Over the long term, this can help to reduce the overall cost of investment.

SIPs are available for a wide range of mutual fund schemes, including equity funds, debt funds, and balanced funds, among others.

Yes, NRIs (Non-Resident Indians) are allowed to invest in mutual funds in India. Here are the steps an NRI can follow to invest in mutual funds in India:

KYC compliance: NRIs need to comply with KYC (Know Your Customer) norms by submitting copies of their passport, PAN card, and overseas address proof to the fund house or its registered agent. The KYC process can be done online or by visiting the mutual fund office.

Choose a mutual fund: After the KYC compliance, an NRI can choose a mutual fund that meets his/her investment objective and risk profile.

Invest through an NRE or NRO account: NRIs can invest in mutual funds in India through their NRE (Non-Resident External) or NRO (Non-Resident Ordinary) accounts. NRE accounts can be used for repatriable investments, which means the investment amount and returns can be transferred back to the country of residence. NRO accounts can be used for non-repatriable investments, which means only the returns can be repatriated.

Mode of Investment: NRIs can invest in mutual funds through offline or online modes.

Taxation: NRIs need to pay taxes on the capital gains earned from mutual funds in India. The tax rate varies depending on the type of mutual fund and the holding period.

It is recommended that NRIs consult a Mutual Fund Distributor to understand the investment process and taxation before investing in mutual funds in India.

Yes, an investor can apply for a nominee in mutual funds. When an investor fills out the application form to invest in a mutual fund, they will have the option to include a nominee for their investments. A nominee is a person who will receive the benefits of the investment in case the investor passes away or is unable to manage the investment due to any reason.

To include a nominee in a mutual fund investment, the investor needs to fill out a nomination form, which is usually available on the mutual fund company’s website or can be obtained from their customer service. The nomination form requires the investor to provide details about the nominee, such as their name, relationship with the investor, address, and contact information.