FAQs

Q. Are investments"mutual fund units risk-free or safe?

This dependsthe underlying instrument that-mutual fund invests in basedits investment objectives Mutual funds that invest"stock market-related instruments cannot be termed risk-free or safe as investment"sharesinherently risky by nature whereas funds that invest"fixed-income instrumentsrelatively safethose that invest only"government securities aresafest

Q. Are investments"mutual funds liquid?

Yes Investorsopen-ended schemes can redeem their unitsany business dayreceivecurrent market valuetheir investments within-short time period (normally three- to five-days) Investorsclose-ended schemes can redeem their units onlymaturitycan sell it"the secondary market like stocks

Q. As-unitholder how much time will it take to receive dividendsrepurchase proceeds?

A mutual fund is required to despatch tounitholdersdividend warrants within 30 daysthe declarationthe dividendthe redemption or repurchase proceeds within 10 working days fromdateredemption or repurchase request made byunitholder

In casefailures to despatchredemptionrepurchase proceeds withinstipulated time period Asset Management Company is liable to pay interest as specified by SEBItime to time (15 at present)

Q. Can-mutual fund changeasset allocation while deploying fundsinvestors?

Consideringmarket trends any prudent fund managers can changeasset allocation ie he can invest higher or lower percentagethe fund"equity or debt instruments compared tois disclosed"the offer document It can be done on-short term basisdefensive considerations ie to protectNAV Hencefund managersallowed certain flexibility"alteringasset allocation consideringinterestthe investors In casemutual fund wants to changeasset allocation on-permanent basis theyrequired to informunitholdersgiving them option to exitscheme at prevailing NAV without any load

Q. Can-mutual fund changenaturethe scheme fromone specified"the offer document?

Yes However no change"the nature or termsthe scheme known as fundamental attributesthe scheme egstructure investment pattern etc can be carried out unless-written communication is sent to each unitholderan advertisement is given"one English daily having nationwide circulation and"a newspaper published"the languagethe region wherehead officethe mutual fund is situated The unitholders haveright to exitscheme atprevailing NAV without any exit load if they do not want to continue"the scheme The mutual fundsalso required to follow similar procedure while convertingscheme form close-ended to open-ended scheme and"casechange"sponsor

Q. Can-mutual fund impose fresh load or increaseload beyondlevel mentioned"the offer documents?

Mutual funds cannot increaseload beyondlevel mentioned"the offer document Any change"the load will be applicable only to prospective investmentsnot tooriginal investments In caseimpositionfresh loads or increase"existing loadsmutual fundsrequired to amend their offer documents so thatnew investorsawareloads attimeinvestments

Q. Caninvestor appoint-nominee for his investment"unitsa mutual fund?

Yes The nomination can be made by individuals applying for holding unitstheir own behalf singly or jointly Non-individuals including society trust body corporate partnership firm KartaHindu Undivided Family holderPowerAttorney cannot nominate

Q. Can non-resident Indians (NRIs) invest"mutual funds?

Yes non-resident Indians can also invest"mutual funds Necessary details"this respectgiven"the offer documentsthe schemes

Q. Do any mutual funds invest"both stocksbonds?

Yes balanced funds invest"a combinationstocksbonds-typical mix is 6040"favourstocks Returnsbalanced fundsnormally lower than pure equity mutual funds when marketsrising however ifmarket declineslossesalso normally lower Balanced fundsbest suited for investors who do not plan their asset allocationyet want to invest"equities Buying separate equityincome funds for your portfolio also achievessame results as buying-balanced fund The advantage"the former option is that you can choose your own split (between stocksbonds ie fixed income) rather than letfund manager decidesame

Q. Do mutual funds offer-periodic investment plan?

Most private sector funds provide youconvenienceperiodic purchase plans (through-Systematic Investment Plan) automatic withdrawal plansthe automatic reinvestmentdividends You would basically need to give post-dated cheques (monthly or quarterly periodic datethe cheque is fixed byAsset Management Company) Most funds allow-monthly investmentas little as Rs500"a provisiongiving 4-6 post-dated chequesfollowlater"more Regular monthly investments are-good way to build-long-term portfolioadd discipline to your investment process

Q. Howmutual funds regulated?

All Asset Management Companies (AMCs)regulated by SEBI andorRBI (in caseAMC is promoted by-bank) In addition every mutual fund has-boarddirectors that representsunit holders interests"the mutual fund

Q. How caninvestors redress their complaints?

Investors would findnamecontact person"the offer documentthe mutual fund scheme whom they may approach"caseany query complaints or grievances Trusteesa mutual fund monitoractivitiesthe mutual fund The namesthe directorsasset management companytrusteesalso given"the offer documents Investors should approachconcerned Mutual Fund Investor Service Centrethe Mutual Fund"their complaints

Ifcomplaints remain unresolvedinvestors may approach SEBI for facilitating redressaltheir complaints On receiptcomplaints SEBI takes upmatter"the concerned mutual fundfollows up"it regularly Investors may send their complaints to

SecuritiesExchange BoardIndia
OfficeInvestor AssistanceEducation (OIAE)

Plot NoC4-A “G” Block 1st Floor
Bandra-Kurla Complex
Bandra (E) Mumbai – 400 051
Phone 26449199-88-77

Q. How do I invest"a limited amount?

Regular investing is-very good way to build upinvestment portfolio (read Dollar Cost Averaging to understand why)this can be done"any amountmoney First plan out how your investments should be spread out ie how much should be invested"equity shareshow much"fixed-income (bonds debentures) instruments This should be basedyour risk profile ieyour risk taking capacity is (how much risk can you take financially)what your attitude towards risk is

Unless you rate highaptitude temperamentknowledge related to investing"shares equity mutual funds offer-better alternative to investing directly"shares Income mutual funds also offer-good alternative to fixed-income investment For regular investment most mutual fund schemes have-Systematic Investment Plan - this can be either monthly or quarterly installments Typicallyminimum installment amount is around Rs500while choosing this plan you will need to give around three- to four-post dated cheques attimeinvestment

Q. How do you evaluate mutual funds performance?

Although past performance is no guarantee forfuture it is-useful wayassessing how well or badly-fund has performed"comparison to its stated objectivespeer group A good way to do this would be to identifyfive best performing funds (within your selected investment objectives) over various periods say 3 months 6 months one year two yearsthree years Shortlist funds that appear"the top 5"eachthese time horizons as they would have thus demonstrated their ability to be not only goodalso consistent performers To get help through this process you can use our Find-A-Fund query module

Q. How do you select-mutual fund scheme?

Whats strategy got to do"selecting-mutual fund Shouldnt you just goinvest"the best performing fund The answer is no Mutual fund investing requires as much strategic input as any other investment option Butadvantage is thatstrategy here is-natural extensionyour asset allocation plan (use our Asset Allocator to understandyour optimum asset allocation plan should be basedyour personal risk profile) Moneycontrol recommendsfollowing process

Identify funds whose investment objectives match your asset allocation needs
Just as you would buy-computer that fits your needsbudget you should choose-mutual fund that meets your risk tolerance (need)your risk capacity (budget) levels (ie has similar investment objectives as your own) Typical investment objectivesmutual funds include fixed income or equity general equity or sector-focused high risk or low risk blue-chips or turnarounds long-term or short-term liquidity focus You can use Moneycontrols Find-A-Fund query module to find funds whose investment objectives match yours
Evaluate past performance look for consistency
Although past performance is no guaranteefuture performance it is-useful wayassessing how well or badly-fund has performed"comparison to its stated objectivespeer group A good way to do this would be to identifyfive best performing funds (within your selected investment objectives) over various periods say 3 months 6 months one year two yearsthree years Shortlist funds that appear"the top 5"eachthese time horizons as they would have thus demonstrated their ability to be not only goodalso consistent performers You can engage"such research through Moneycontrols Find-A-Fund query module Or to get such-list use our Best Picks reportsuse this methodology as its predominant basis

Q. How does "entry load" eat into your investment returns?

A 225 entry load sounds small But it still bites-chunk off your returns over-long periodtime For instance Rs 1 lakh invested directly"the no-load optionan equity fund that grows at-rate15 over-period20 years yields around Rs 1636 lakh against Rs 1599 lakh that-load fund would returna differenceRs 36820 This is because even-small sum225 gets compounded overyears

The pinch remainssame even"a systematic investment plan (SIP) As SIPs entail investments on-regular basis say every month you endpaying entry loadsall your investment instalments Assume you had invested Rs 5000"Reliance Vision Fund (RVF)January 1 2003 through-monthly SIP If you had withdrawn your entire investment after five yearsDecember 31 2007 you would have got back Rs 1152 lakh"the no-load optionRs 1125 lakh"a load option-differencea cool Rs 25914

Q. How is-mutual fund set up?

A mutual fund is set up"the forma trusthas sponsor trustees asset management company (AMC)custodian The trust is established by-sponsor or more than one sponsor who is like promotera company The trusteesthe mutual fund hold its property forbenefitthe unitholders Asset Management Company (AMC) approved by SEBI managesfunds by making investments"various typessecurities Custodian who is registered"SEBI holdssecuritiesvarious schemesthe fund"its custody The trusteesvested"the general powersuperintendencedirection over AMC They monitorperformancecomplianceSEBI Regulations bymutual fund

SEBI Regulations require that at least two thirdsthe directorstrustee company or boardtrustees must be independent ie they should not be associated"the sponsors Also 50the directorsAMC must be independent All mutual fundsrequired to be registered"SEBI before they launch any scheme

Q. How is NAV calculated?

The valueallsecurities"mutual funds portfolio is calculated daily From this all expensesdeductedthe resultant value divided bynumberunits"the fund isfunds NAV or its Net Asset Value

Q. How long will it take for transferunits after purchasestock markets"caseclose-ended schemes?

According to SEBI Regulations transferunits is required to be done within thirty days fromdatelodgmentcertificates"the mutual fund

Q. How many funds or stocks should you diversify your portfolio over?

To getmaximum benefitreducing your risk through diversification spread your portfolio across different assets whose returnsnot 100 correlated Different assets should ideally span across different asset classes such as fixed income equity real estate gold as well as different investment options withinasset classes eg within equity shares your exposure should be to companies"different sectors or within fixed income investments partly government riskpartly corporate risk

As-thumb rule diversify your investments across 15-20 different portfolio holdings if youdirectly investing"stocks or bonds If youinvesting through mutual funds then three MF schemes for stocksthree schemes for bonds should provide you adequate diversification

Q. How significantfund costs while choosing-scheme?

The costinvesting through-mutual fund is not insignificantdeserves due consideration especially when it comes to fixed income funds Management fees annual expensesthe fundsales loads can take away-significant portionyour returns As-general rule 1 towards management fees06 towards other annual expenses should be acceptable Carefully examinefee-fund charges for getting"and outthe fund Again you can queryentryexit loads under our Find-A-Fund query module or get-pre-defined shortlistfundsthe load specification structure throughMutual Fund Directory section

Q. How to diversify?

Dont just zero"on one mutual fund (to avoidriskbeing overly dependentany one fund) Pick two preferably three mutual funds that would match your investment objective"each asset allocation categoryspread your investment We recommend-6040 split if you have shortlisted 2 fundsa 503020 split if you have shortlisted 3 funds for investment

Q. How to fill upapplication forma mutual fund scheme?

An investor must mention clearly his name address numberunits applied forsuch other information as required"the application form He must give his bank account number so as to avoid any fraudulent encashmentany chequedraft issued bymutual fund at-later date forpurposedividend or repurchase Any changes"the address bank account number etc at-later date should be informed tomutual fund immediately

Q. How to identify funds whose investment objectives match your asset allocation needs?

Just as you would buy-computer that fits your needsbudget you should choose-mutual fund that meets your risk tolerance (need)your risk capacity (budget) levels (ie has similar investment objectives as your own) Typical investment objectivesmutual funds include fixed income or equity general equity or sector-focused high risk or low risk blue-chips or turnarounds long-term or short-term liquidity focus You can use moneycontrol’s Find-A-Fund query module to find funds whose investment objectives match yours

Q. How to invest"a schemea mutual fund?

Mutual funds normally come out"an advertisement"newspapers publishingdatelaunchthe new schemes Investors can also contactagentsdistributorsmutual funds whospread all overcountry for necessary informationapplication forms Forms can be deposited"mutual funds throughagentsdistributors who provide such services Now-dayspost officesbanks also distributeunitsmutual funds Howeverinvestors may please note thatmutual funds schemes being marketed by bankspost offices should not be taken as their own schemesno assurancereturns is given by them The only rolebankspost offices is to help"distributionmutual funds schemes toinvestors

Investors should not be carried away by commissiongifts given by agentsdistributors for investing"a particular scheme Onother hand they must considertrack recordthe mutual fundshould take objective decisions
Chat Transcripts
Mutual Fund | Mar 24, 2015, 10.00hrs

How to create wealth investing in mutual funds?

Dr Renu Pothen,

Research Head, fundsupermart.com

Mutual Fund | Mar 24, 2015, 11.00hrs

What kind of funds one should invest now?

Hemant Rustagi,

CEO, Wiseinvest Advisors

Mutual Fund | Mar 24, 2015, 12.00hrs

Know more about Mutual Funds

Jitendra P.S.Solanki,

Investment Adviser & CFP, JS Financial Advisors

Mutual Fund | Mar 24, 2015, 13.00hrs

Investing in Mutual Funds in volatile markets

Jiju Vidyadharan,

Director- Funds & Fixed Income, CRISIL

Mutual Fund | Mar 24, 2015, 14.00hrs

Where should you put your money?

Jayant Pai,

VP & CFP, PPFAS

Mutual Fund | Mar 24, 2015, 15.00hrs

Make Money with Mutual Funds

Mehrab Irani,

General Manager, Tata Investment Corporation

Mutual Fund | Mar 24, 2015, 16.00hrs

The best mutual funds to buy right now

Feroze Azeez,

Director- Investment Product, AnandRathi

Mutual Fund | Apr 8, 2015, 11.00hrs

Is mutual fund investing a good idea?

Kiran Telang,

Director, Dhanayush Capital Advisors

Mutual Fund | Apr 8, 2015, 12.00hrs

Build wealth with mutual funds

Amit Trivedi,

Author & Founder, Karmayog Knowledge Academy

Mutual Fund | Apr 8, 2015, 14.00hrs

When is it the right time to say Goodbye to your fund

Sumeet Vaid,

Founder & CEO, Ffreedom Financial Planners

Mutual Fund | Apr 8, 2015, 15.00hrs

How to build a retirement portfolio with mutual fund?

Pankaj Mathpal,

MD, Optima Money Managers

Mutual Fund | Apr 8, 2015, 16.00hrs

Are your mutual funds doing good?

Umesh Rathi,

CFPcm, Arihant Capital