What is the average annual return the fund has given in the last 10 years?
Enough to invest, not make you an expert. You must spend many, many hours in research to understand the mutual fund world.

Why does the disclaimer say Mutual Funds are subject to market risk?
The price of any security is dependent on ‘market forces’, and the market acts on any news or development, making it difficult to predict the direction of the market, it’s impossible to predict the price of a share or security in the short term.

Aren’t RDs and FDs enough to secure the future?
If the investor wants their capital to be safe and earn some reasonable fixed rate of return, irrespective of inflation and taxes, then these may be good enough. However, if the investor wants to earn a positive return even after factoring inflation and taxes, then these may not be good enough.

Can Mutual Funds help create wealth?
Yes, set practical financial goals with an advice of professional for long term with proper funds which suits us.

Why don’t Mutual Funds give a fixed rate of return like a saving account or FD?
Mutual funds are subjected to market fluctuations, risk regime.

How can one track a Mutual Fund performance?
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.

Do Mutual Funds issue a passbook?
Mutual Funds do not issue a passbook, they issue an Account Statement. In a Mutual Fund scheme too, similar transactions could be there: purchase, redemption’s, switches, reinvestment of dividend etc. In a Mutual Fund scheme, such transactions are captured in the account statement.

What returns can I expect with only 500 rupees?
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.

Why was KYC introduced in financial markets?
Main reason for KYC to be introduced in financial markets was to limit/prevent cases of fraud, tax evasion and money laundering.

What is the role of an investment advisor or a mutual fund distributor in selecting a scheme?
Mutual fund investment through an advisor give fruitful results in a proper manner because they advised after considering our requirement, financial ability, future needs, etc.,

How are you taxed after selling a mutual fund in an IRA?
Mutual fund exchanges are not taxable as long as the money is being exchanged into an account registered as an IRA. Dividend and capital gains distributions made by funds and stocks result from the initial investment and are not considered contributions or taxable events.

How are mutual funds different from Portfolio Management Schemes?
Portfolio management scheme popularly known as PMS are specialized investment vehicle for lump sum investments. The portfolio manager invests the money in shares and other securities and manages the portfolio on behalf of the client…. The client can look at where the portfolio manager is investing client’s money.

What documents are provided as proof of my investment in Mutual Funds?
Once anyone enter into mutual fund scheme, they must be provided with account statement, date of transaction, amount invested and their current price. One can do multiple transactions in the same account. Even if you loss, again you will be provided by the details by the mutual fund company.

Why invest in gold funds when we can invest in gold?
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. Because of its direct gold pricing, there is a complete transparency on the holdings of a Gold ETF

How do mutual funds work in India?
The SEBI regulations include a minimum start-up capital requirement of Rs. 500 million for open-ended schemes and Rs. 200 million for closed-ended schemes. In addition, Indian mutual funds are only allowed to borrow up to 20% of their value for a term not to exceed six months to meet short-term liquidity requirements.

TAX REGIME FOR MUTUAL FUNDS IN INDIA

1. Dividend Distribution Tax (DDT) on income distributed on Mutual Fund Schemes.

Note: 

• The above rates are including applicable surcharge of 12% and education cess of 3%
• Income distribution tax payable by the mutual funds would be at the rates specified above on the net amount of dividend distributed (i.e. the taxes would be grossed up). This provision is effective from 1 October 2014 and the impact of the same has not been reflected above.
• Where any income is distributed by a mutual fund under an infrastructure debt fund scheme to a non-resident investor (corporate and non-corporate), the mutual fund shall be liable to a distribution tax at the rate of 5.77% on the income so distributed.

INCIDENCE OF TAX ON MUTUAL FUND INVESTORS

2.Capital Gain Tax

3.SHORT TERN CAPITAL GAIN

The individuals (including NRIs / PIOs) and HUFs, are taxed in respect of their total income at the following rates:

Note:
1. “Equity Oriented Scheme” means a fund where the investible funds are invested in equity shares in domestic companies to the extent of more than 65% of the total proceeds of such fund; and the fund has been set up under a scheme of a Mutual Fund specified under section 10(23 D) of the Income-tax Act, 1961 (Act).

2. Withholding tax applies on capital gains for NRI investors. 3. In case of non-resident unit holder who is a resident of a country with which India has signed a Double Taxation Avoidance Agreement (“DTAA” or “tax treaty”) (which is in force) income-tax is payable at the rates provided in the Act, as discussed above, or the rates provided in such tax treaty, if any, whichever is more beneficial to such non-resident unit holder.
Various Categories of MF Schemes which fall under “Other than Equity Oriented Funds”

• Liquid Funds /Money Market Funds
• Income (Debt) Fund
• Balanced Fund (Equity < 65%)
• Gilt Funds
• Gold ETFs
• Other ETFs
• Fund of Funds Investing Overseas
• Fund of Funds Investing Domestic
• Infrastructure Debt Fund

4. Securities Transaction Tax (STT)

Provisions regarding Dividend income and Bonus
(i) Any losses arising from the sale/redemption of units purchased within 3 months prior to the record date (for entitlement of dividends) and sold within 9 months after such date, is disallowed to the extent of dividend income received or receivable on such units which is claimed as tax exempt.

(ii) Where an investor purchases unit within 3 months before the record date (for entitlement of bonus) and sells/redeems the units within 9 months after that date, and by virtue of holding the original units, he becomes entitled to bonus units, then the loss arising on transfer of original units shall be ignored for the purpose of computing his income chargeable to tax. In fact, the loss so ignored shall be treated as cost of acquisition of such bonus units.

Other Tax Provisions:
(i) Capital gains arising on transfer by a unit holder of units held by him on consolidation of schemes of a mutual fund shall not be treated as a transfer and are exempt from capital gains tax provided they are allotted units in the consolidated scheme of the mutual fund. The aforesaid exemption is provided only where the consolidation is of two or more schemes of an equity-oriented fund or two or more schemes of a non-equity-oriented fund.

(ii) Capital gains arising on transfer by a unit holder of units held by him on consolidation of plan of a mutual fund scheme shall not be treated as a transfer provided they are allotted units in the consolidated plan of that scheme of the mutual fund.

(iii) Switching units of mutual fund within the same scheme from Growth Plan to Dividend Plan and vice-versa is subject to capital gains tax.

(iv) Fund of Fund Scheme that invests in an Equity Oriented Fund is subjected to the same tax treatment as applicable to a non-equity-oriented fund (i.e. other than equity-oriented fund).