Q. What iffunds poor results persist?

If-fund regularly trails other funds that invest"similar securities consider replacing it The poor performance is more often than not-reflectionthe relative expertisethe asset management company

Q. What is-FundFunds (FoF) scheme?

A scheme that invests primarily"other schemesthe same mutual fund or other mutual funds is known as-FoF scheme An FoF scheme enablesinvestors to achieve greater diversification through one scheme It spreads risks across-greater universe

Q. What is-Mutual Fund?

A Mutual Fund is-vehicle for investing"stocksbonds It is notalternative investment option to stocksbonds rather it poolsmoneyseveral investorsinvests this"stocks bonds money market instrumentsother typessecurities Buying-mutual fund is like buying-small slicea big pizza The ownera mutual fund unit gets-proportional sharethe funds gains losses incomeexpenses

Q. What is-sales or repurchaseredemption price?

The price or NAV-unitholder is charged while investing"an open-ended scheme is called sales price It may include sales load if applicable

Repurchase or redemption price isprice or NAV at whichopen-ended scheme purchases or redeems its units fromunitholders It may include exit load if applicable

Q. What isAsset Management Company (AMC)?

The company that manages-mutual fund is calledAMC For all practical purposes it isorganized forma money portfolio manager An AMC may have several mutual fund schemes"similar or varied investment objectives The AMC hires-professional money manager who buyssells securities"line"the funds stated objective

Q. What isentry loadan exit load?

Some Asset Management Companies (AMCs) have sales charges or loadstheir funds (entry load andor exit load) to compensate for distribution costs Funds that can be purchased without-sales chargecalled no-load funds Entry load is charged attimeinvestor purchasesunitsa scheme The entry load percentage is added toprevailing NAV attimeallotmentunits Exit load is charged attimeredeeming (or transferringinvestment between schemes) The exit load percentage is deducted fromNAV attimeredemption (or transfer between schemes) This amount goes toAsset Management Companynot intopoolfundsthe scheme

Q. What is Net Asset Value (NAV)?

NAV istotal asset value (netexpenses) per unitthe fundis calculated byAsset Management Company (AMC) atendevery business day Net asset value on-particular date reflectsrealisable value thatinvestor will get for each unit that he his holding ifscheme is liquidatedthat date

Q. What is Systematic Investment Plan or SIP?

SIP worksthe principleregular investments It is like your recurring deposityou put"a small amount every month It allows you to invest"a MF by making smaller periodic investments (monthly or quarterly)"placea heavy one-time investment ie SIP allows you to pay 10 periodic investmentsRs 500 each"placea one-time investmentRs 5000"an MF Thus you can invest"an MF without altering your other financial liabilities It is imperative to understandconceptrupee cost averagingthe powercompounding to better appreciateworkingSIPs

SIP has brought mutual funds withinreachan average person as it enables even those"tight budgets to invest Rs 500 or Rs 1000 on-regular basis"placemaking-heavy one-time investment

While making small investments through SIP may not seem appealing at first it enables investors to get intohabitsaving And overyears it can really add upgive you handsome returns A monthly SIPRs 1000 atrate9 would grow to Rs 669 lakh"10 years Rs 1783 lakh"30 yearsRs 4420 lakh"40 years

Even forcash-rich SIPs reduceschanceinvesting atwrong timelosing their sleep over-wrong investment decision Howevertrue benefitan SIP is derived by investing at lower levels Other benefits include

1 Discipline
The cardinal rulebuilding your corpus is to stay focused invest regularlymaintain discipline"your investing pattern A few hundreds set aside every month will not affect your monthly disposable income You will also find it easier to part"a few hundreds every month rather than set aside-large sum for investing"one shot

2 Powercompounding
Investment gurus always recommend that one must start investing early"life Onethe main reasons for doing that isbenefitcompounding Letís explain this"an example Person A started investing Rs 10000 per year atage30 Person B started investingsame amount every year atage35 When they attainedage60 respectively A had built-corpusRs 1223 lakh while person Bís corpus was only Rs 789 lakh For this example-ratereturn8 compounded has been assumed SodifferenceRs 50000"amount invested made-differencemore than Rs 4 lakh to their end-corpus That difference is due toeffectcompounding The longer(compounding) periodhigherreturns

Now insteadinvesting Rs 10000 each year suppose A invested Rs 50000 after every five years starting atage35 The total amount invested thus remainssame -- Rs 3 lakh However when he is 60 his corpus will be Rs 1043 lakh Again he losesadvantagecompounding"the early years

3 Rupee cost averaging
This is especially true for investments"equities When you investsame amount"a fund at regular intervals over time you buy more units whenprice is lower Thus you would reduce your average cost per share (or per unit) over time This strategy is called rupee cost averaging With-sensiblelong-term investment approach rupee cost averaging can smoothen outmarkets upsdownsreducerisksinvesting"volatile markets

People who invest through SIPs capturelows as well ashighsthe market InSIP your average costinvesting comes down since you will go through all phasesthe market bull or bear

4 Convenience
This is-very convenient wayinvesting You have to just submit cheques along"the filledenrolment form The mutual fund will depositchequesthe requested datecreditunits to oneís accountwill sendconfirmation forsame

5 Other advantages
∑ Thereno entry or exit loadsSIP investments
∑ Capital gains wherever applicabletaxed on-first-in first-out basis

Disclaimer While we have made efforts to ensureaccuracyour content (consistingarticlesinformation) neither this website norauthor shall be held responsible for any losses incidents suffered by people accessing using or is supplied"the content

Q. What isdifference betweenopen-endedclose-ended scheme?

Open-ended schemes can issueredeem units any time duringlifethe scheme while close-ended schemes cannot issue new units except"casebonus or rights issue Hencenumberunitsan open-ended scheme can fluctuate on-daily basis while that is notcase for close-ended schemes Another wayexplaining this difference is that new investors can joinscheme by directly applying tomutual fund at applicable net asset value related prices"caseopen-ended schemes while that is notcase"caseclose-ended schemesnew investors can buyunitssecondary market only

Q. What ishistoryMutual Funds"IndiaroleSEBI"mutual funds industry?

Unit TrustIndia wasfirst mutual fund set up"India"the year 1963 In early 1990s Government allowed public sector banksinstitutions to setmutual funds

Inyear 1992 Securitiesexchange BoardIndia (SEBI) Act was passed The objectivesSEBIĖ to protectinterestinvestors"securitiesto promotedevelopmentand to regulatesecurities market

As far as mutual fundsconcerned SEBI formulates policiesregulatesmutual funds to protectinterestthe investors SEBI notified regulations formutual funds"1993 Thereafter mutual funds sponsored by private sector entities were allowed to entercapital market The regulations were fully revised"1996have been amended thereaftertime to time SEBI has also issued guidelines tomutual fundstime to time to protectinterestsinvestors

All mutual funds whether promoted by public sector or private sector entities including those promoted by foreign entitiesgoverned bysame setRegulations There is no distinction"regulatory requirements formutual fundsallsubject to monitoringinspections by SEBI The risks associated"the schemes launched bymutual funds sponsored byentities aresimilar type

Q. What isrolea Fund Manager?

Fund managersresponsible for implementing-consistent investment strategy that reflectsgoalsobjectivesthe fund Normally fund managers monitor marketeconomic trendsanalyse securities"order to make informed investment decisions

Q. What is venture capital Whatventure capital funds?

Venture Capital isfundinitial capital provided to businesses typically at-start-up stagemany times for new untested ideas Venture capital normally comes"whereconventional sourcesfinance do not fit in Venture capital fundsmutual funds that manage venture capital money iefunds aggregate moneyseveral investors who want to provide venture capitaldeploy this money"venture capital opportunities

Typically venture capital funds have-higher risk higher return profile as compared to normal equity fundswhether you should invest"these would dependyour specific risk profileinvestment time-frame

Q. What mutual fund is suitable for you?

Just as you would buy-computer that fits your needsbudget you should choose-mutual fund that meets your risk toleranceyour risk capacity 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 our Find-A-Fund query module to find funds whose investment objectives match yours

You can also read our expert articleInvestment"Mutual Funds to understand how best to find-mutual fund to meet your needswhat other factors to consider while evaluating mutual funds for investment

Q. What shouldinvestor look intooffer document?

An abridged offer documentcontains very useful information is required to be given toprospective investor bymutual fund The application form for subscription to-scheme isintegral partthe offer document SEBI has prescribed minimum disclosures"the offer document An investor before investing"a scheme should carefully readoffer document Due care must be given to portions relating to main featuresthe scheme risk factors initial issue expensesrecurring expenses to be charged toscheme entry or exit loads sponsorís track record educational qualificationwork experiencekey personnel including fund managers performanceother schemes launched bymutual fund"the past pending litigationspenalties imposed etc

Q. When should you change your investment plan?

For example as you grow older you might adopt-more conservative investment approach pruning someyour riskier (equity-oriented) funds

Q. When willinvestor get certificate or statementaccount after investing"a mutual fund?

Mutual fundsrequired to despatch certificates or statementsaccounts within six weeks fromdateclosurethe initial subscriptionthe scheme In caseclose-ended schemesinvestors would get either-demat account statement or unit certificates as thesetraded"the stock exchanges In caseopen-ended schemes-statementaccount is issued bymutual fund within 30 days fromdateclosureinitial public offerthe scheme The procedurerepurchase is mentioned"the offer document

Q. Why Choose Mutual Funds?

Mutual fundsinvestment vehiclesyou can use them to invest"asset classes such as equities or fixed income moneycontrol recommends that you usemutual fund investment route rather than invest yourself unless you haverequired temperament aptitudetechnical knowledge
In this article we discuss whyhow you should choose mutual funds If you would like to familiarise yourself"the basic conceptsworkingsa mutual fund Understanding Mutual Funds would be-good place to start

Q. Why should you consider Fund Costs?

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 examine loadfee-fund charges for getting"and outthe fund

Q. Why should you invest through Mutual Funds?

Firstly wenot all investment professionals We go to-doctor when we need medical advice or-lawyer for legal guidance similarly mutual fundsinvestment vehicles managed by professional fund managers And unless you rate highlythe Investment IQ Quiz we recommend you use this option for investing Mutual fundslike professional money managers however-key factor"their favour is that theymore regulatedhence offer investorsability to analyseevaluate their track record

Secondly investing is becoming more complex There was-time when things were quite simple -market went up"the arrivalthe first monsoon showersevery year around Diwali Since India started integrating"the world (withstartthe liberalisation process) complex factors such asincrease"short-term US interest ratescollapsethe Brazilian currency or defaultits debt byRussian government have started havingimpactthe Indian stock market Although it is possible forindividual investor to understand Indian companies (and investing)"suchenvironmentprocess can become fairly time consuming Mutual funds (whose fund managerspaid to understandissueswhose asset management company invests"research) provideoptioninvesting without getting lost"the complexities

Lastlymost importantly mutual funds provide risk diversification Diversificationa portfolio is amongstprimary tenetsportfolio structuring (see The Need to Diversify) And-necessary one to reducelevelrisk assumed byportfolio holder Mostusnot necessarily well qualified to applytheoriesportfolio structuring to our holdingshence would be better off leaving that to-professional Mutual funds represent one such option

Q. Why should you monitorreview your fund?

Having madeinvestment"a mutual fund you should monitor it to see whether its managementperformance is"line"stated objectivesalso whether its performance exceeds or lags your expectations Unlike individual stocksbonds mutual fund reviewsrequired less frequently once"a quarter should be sufficient
A reviewthe fundís performance should be carried out"the objectiveholding or selling your investment"the mutual fund You might need to sell your investment"a mutual fund if anythe events below apply
Chat Transcripts
Mutual Fund | Sep 1, 2015, 10.00hrs

Know more about Mutual Funds

Mehrab Irani,

General Manager, Tata Investment Corporation

Mutual Fund | Sep 1, 2015, 11.00hrs

What kind of fund one should invest now?

Hemant Rustagi,

CEO, Wiseinvest Advisors

Mutual Fund | Sep 1, 2015, 12.00hrs

Should you bet on mid cap funds now?

Jitendra P.S.Solanki,

Investment Adviser & CFP, JS Financial Advisors

Mutual Fund | Sep 1, 2015, 14.00hrs

Investing in Mutual Funds in volatile markets

Jiju Vidyadharan,

Director- Funds & Fixed Income, CRISIL

Mutual Fund | Sep 1, 2015, 15.00hrs

SIP or Lumpsum investments?

Jayant Pai,


Mutual Fund | Sep 1, 2015, 15.00hrs

Which mutual fund I should buy in this volatile market?

Pankaj Mathpal,

Managing Director, Optima Money Managers

Mutual Fund | Sep 1, 2015, 16.00hrs

How to get a balanced mutual fund portfolio?

Dr Renu Pothen,

Research Head,fundsupermart.com

Mutual Fund | Sep 15, 2015, 10.00hrs

Know your money matters better

Kiran Telang,

Director, Dhanayush Capital Advisors

Mutual Fund | Sep 15, 2015, 11.00hrs

The best mutual fund schemes to buy right now

Feroze Azeez,

Dy CEO, AnandRathi Private Wealth Management

Mutual Fund | Sep 15, 2015, 14.00hrs

Know more about Mutual Funds

Ramalingam K,

Director & CFP, holisticinvestment.in.

Mutual Fund | Sep 15, 2015, 15.00hrs

SIP or lumpsum investments?

Suresh Sadagopan,

Founder, Ladder7 Financial Advisories

Mutual Fund | Sep 15, 2015, 16.00hrs

Are your mutual funds doing good?

Umesh Rathi,

CFPcm, Arihant Capital