Benefits:

• Funds have been managed by professionals who are equipped with plans and experience in a scientific and calculated approach.
• The investor can diversify the portfolio which they want to invest and having wide array of funds without large amount of money.
• Due to large pool of money from a number of investors and brokerage charges, exit load and other will be lower.
• In open ended funds, an investor may buy or sell whenever they want without any worrying about in finding the buyer at right price.
• Daily market updates on the value of your investment to maintain transparency.
• Reduce volatility of returns and risk through diversification by investing in a number of companies and sectors.

Limitations:

• Mutual funds are subject to market risk.
• No guarantee of returns.
• Diversification of portfolio doesn’t maximize returns.
• Selecting right financial securities is not easy.
• Cost management not proportional to performance.
• Mutual fund managers may follow unethical (corrupt) practices to boost the performance of the various fund-related schemes.
• 12b-1 fees: Hidden fees are popularly known as ’12b-1 fees’. It is basically a sum of annual distribution fees or marketing fees.

Tax Efficiency
Equity Funds
Previously, dividends are tax-free in the hands of the investor.
Investments for over 12 months qualify for long-term capital gains, which are previously, exempt from tax.
Securities Transaction Tax is applicable on redemption of equity fund investments.
LTCG on these instruments realized after 31.3.2018 by an individual will remain tax exempt up to Rs 1 lakh per annum i.e. the new LTCG tax of 10% would be levied only on LTCG of an individual exceeding Rs 1 lakh in one fiscal.

Debt Funds
Previously, dividends are tax-free in the hands of the investor and distribution tax together with surcharge and education cess, as may be applicable, payable by the Mutual Fund on dividends.
Investments for over 12 months qualify for long-term capital gains.
LTCG on these instruments realised after 31.3.2018 by an individual will remain tax exempt up to Rs 1 lakh per annum i.e. the new LTCG tax of 10% would be levied only on LTCG of an individual exceeding Rs 1 lakh in one fiscal.
(*This information is general in nature and investors should seek appropriate legal advice in their own case.)
Mutual funds are registered with SEBI, regulatory body and they function under strict regulations designed to protect the interests of investors.

As per the rule of SEBI, no entry load will be charged for purchase / additional purchase / switch-in, registrations under SIP/ STP / SIP Plus accepted by the Fund.

Criteria to be considered while investing in mutual fund:

• Age and tenure (when we are investing and time to get returns)
• Requirement or goal
• Type of fund like Equity/ELSS/Debt/Balanced/MIP/FMP Funds
• Amount of investment.
• Risk bearing capacity.
• Do you have Emergency Fund?
• Do you have Term Policy, Health Policy?

What is KYC?
The KYC registration is being centralized through KYC registration agencies registered with SEBI. Each investor undergo only once for verification in securities market and would be shared information to other intermediaries.
Documents to submit for KYC:

• Identity proof
• Address proof
• Passport copy
• Passport size photograph
• PAN card
• Driving licence/passport/voter ID/bank photo pass book copy.

How do I know the fund which is suitable to me?
Mutual funds are subjected to market risks. Fund or plan are maintained with different category like long or short term, equity based, debt based, income, growth, sectorial etc., It is suggestable to consult with a financial adviser to take an advice.

Does mutual fund require D-mat account?
In mutual funds the D-mat account is not mandatory including SIP.
What happens when a Mutual Fund company shuts down/gets sold off?
Based on the list of units holding register maintained by the mutual fund company the funds will be distributed by regulatory authority even if the mutual fund company shuts down.
What are the Scheme Related Documents? What information do these documents provide?

The scheme related document is prepared by AMC and submitted to SEBI for approval which contains:
1. Key Information Memorandum (KIM)
Summary of scheme information document and statement of additional information which are important content in scheme like fund managers, plans, options, performance, benchmarks etc.,
2. Scheme Information Document (SID)
Investment objectives and policies, allocation and it patterns, fund team, risk factors, load, provisions of liquidity, unit holder information, branches, service centers etc., information contained in this document
3. Statement of Additional Information (SAI)
Information regarding sponsors, AMC and trustees, custodian, registrar, bankers, auditors and legal counsel.

How to start SIP?
SIP is a plan to invest in mutual fund regularly like monthly, quarterly over a period of time. SIP allows one to buy units on a given date each month, so it implemented as regular saving plan to an investor.

What happen if you missed out to pay SIP?
If you missed out 3 consecutive SIP, the fund house will cancel your SIP. You won’t penalize by the fund house and directly will get cancelled only if 3 series of failure.

How to stop SIP?
For cancellation of your SIP, make a login to your mutual fund account and select an option to cancel SIP and same will get closed within 30 days as per request. For manual cancellation, approach concerned fund company and submit manual cancellation document.

What are the profits by investing through SIP?

• By investing through SIP you can get more component interest
• Be in the market always instead of investing at one time
• Unit Price = Net Asset Value (NAV)
• Through SIP we can invest when market grows/down
• We can invest every month/quarterly/half-yearly/yearly also
• At least 6 months you have to invest in the particular fund
• You can meet MF Agent, Fund Companies, Online and Banks also regarding MFs
• Start your investment early to get good returns
• No need to look what’s happening in markets every time
• You can invest minimum Rs.100 also
• Hold you investments at least 7 years to get good returns

What is Net Asset Value (NAV)?
Net Asset Value = Market value of the assets + accrued income – liabilities / No. of units outstanding.

Can the sell price be different from the NAV?
Yes. The sell price of schemes can be different from the NAV due to exit loads.
Redemption price = NAV, if exit load is not levied.
Redemption price < NAV, if exit load is levied.

What is a direct plan?
The investment must not route through the distributor is mandated by SEBI for mutual funds from 01/01/2013 on wards. Such separate plan has a lower expense ratio excluding distribution expenses, commission, etc., and no commission is to be paid from such plans. The plan also has a separate NAV. Investment can be made in lump sum, i.e. a one-time payment, or through a Systematic Investment Plan (SIP).

Are returns from mutual funds guaranteed?
Mutual fund does not give any assurance for guaranteed returns but SEBI allows companies based on some conditions. But the sponsor or the AMC, guarantees a minimum level of return and makes good the difference if the actual returns are less than the guaranteed minimum. Investments in mutual funds are not guaranteed by the Government of India, the Reserve Bank of India or any other government body. The name of the guarantor and the manner in which the guarantee shall be met must be disclosed in the offer document by the Mutual Fund.

Does investing in Mutual Funds mean investing in equities?
Each and every fund is schemed with specific objective and frame work and mentioned all the details in prospectus of the fund. As per the scheme may invest in both equity and debt or any one based on asset classification.

What are some mistakes people make when investing in Mutual Funds?

• With no proper investing plan.
• Investing in large number of funds.
• Waiting for market to correct before investing.
• Redemption of investment with panicking.
• No proper monitoring.
• Lack of knowledge and strategies.
• Tax impact.

When should I start investing in mutual funds?
Funds are different types based on the requirement, tenure, amount of investment, type etc. Why don’t one think now itself is the good time to invest in something unless there is no money with them. There is no minimum and maximum time to invest in mutual fund unless sufficient amount you have.

What is the difference between Mutual Fund Distributor and Investment Adviser?
Actually, one and both are same. Both are interchangeably designed for the purpose of sale of mutual fund
Investment adviser is registered with SEBI as RIA (Registered Investment Adviser) having fiduciary (trust on the adviser) duty than the distributor.
Distributors earn commission on sales of funds and income as client fee to advisor
RIA is not only to give an advice but also help in investment for investors but distributors will not.

How can I track my investments on a regular basis?
Every thing will be on online to track the information regarding mutual funds. Instead of that mutual fund companies release the fact sheet.

What is an Asset Management Company (AMC)?
Each and every mutual fund has an AMC and is responsible to manage the investments made by the investors in the mutual fund. Under AMC the professional is in the chairs to manage the funds and may assisted by a custodian and a registrar. AMCs are obliged to make investments in compliance with SEBI regulations.