A mutual fund is an investment vehicle made up of a pool of moneys collected from many investors for the purpose of investing in securities such as shares, bonds, money market instruments and other assets.

Mutual Funds can be broadly categorised into three types viz. Equity, Debt and Hybrid. Equity MFs invest primarily in shares of listed companies wherein Debt MFs invest in Govt. securities, commercial papers, debentures, money market instruments etc. 

 

Equity Funds/ Growth Funds
Funds that invest in equity shares are called equity funds. They carry the principal objective of capital appreciation of the investment over the medium to long-term. The returns in such funds are volatile since they are directly linked to the stock markets. They are best suited for investors who are seeking capital appreciation. There are different types of equity funds such as Diversified funds, Sector specific funds and Index based funds.

Diversified funds 
These funds invest in companies spread across sectors. These funds are generally meant for risk-taking investors who are not bullish about any particular sector.

Sector funds 
These funds invest primarily in equity shares of companies in a particular business sector or industry. These funds are targeted at investors who are extremely bullish about a particular sector. 

Index funds 
These funds invest in the same pattern as popular market indices like S&P 500 and BSE Index. The value of the index fund varies in proportion to the benchmark index.

Tax Saving Funds
These funds offer tax benefits to investors under the Income Tax Act. Opportunities provided under this scheme are in the form of tax rebates U/s 88 as well saving in Capital Gains U/s 54EA and 54EB. They are best suited for investors seeking tax concessions.

Debt / Income Funds
These Funds invest predominantly in high-rated fixed-income-bearing instruments like bonds, debentures, government securities, commercial paper and other money market instruments. They are best suited for the medium to long-term investors who are averse to risk and seek capital preservation. They provide regular income and safety to the investor.

Liquid Funds / Money Market Funds 
These funds invest in highly liquid money market instruments. The period of investment could be as short as a day. They provide easy liquidity. They have emerged as an alternative for savings and short-term fixed deposit accounts with comparatively higher returns. These funds are ideal for Corporates, institutional investors and business houses who invest their funds for very short periods. 

Gilt Funds
These funds invest in Central and State Government securities. Since they are Government backed bonds they give a secured return and also ensure safety of the principal amount. They are best suited for the medium to long-term investors who are averse to risk.

Balanced Funds 
These funds invest both in equity shares and fixed-income-bearing instruments (debt) in some proportion. They provide a steady return and reduce the volatility of the fund while providing some upside for capital appreciation. They are ideal for medium- to long-term investors willing to take moderate risks.

Hedge Funds
These funds adopt highly speculative trading strategies. They hedge risks in order to increase the value of the portfolio.

Mutual Fund investments can start with as low as Rs. 500 and there is no upper limit.

No. A demat account is not necessary to invest in Mutual Funds.

An SIP or Systematic Investment Plan facilitates regular investments in Mutual Funds. The functioning is very similar to a recurring deposit ( RD ) wherein small amounts get debited from the bank account, usually on a monthly basis, and get invested in chosen mutual fund scheme/s. However, unlike bank RD, the money in Equity MFs is invested in the share market. It works on the principle of Rupee Cost Averaging as money gets invested in a staggered manner.

NAV or Net Asset Value of the fund is the cumulative market value of the assets of the fund net of its liabilities. NAV per unit is simply the net value of assets divided by the number of units outstanding. For example, if the market value of securities of a mutual fund scheme is Rs 200 lakhs and the mutual fund has issued 10 lakhs units of Rs. 10 each to the investors, then the current NAV per unit of the fund is Rs.20. NAV per unit of an MF is equivalent to share price of a share.

Some Mutual Funds provide the investor with an option to shift his investment from one scheme to another within that fund. For this option the fund may levy a switching fee. Switching allows the Investor to alter the allocation of their investment among the schemes in order to meet their changed investment needs, risk profiles or changing circumstances during their lifetime.

There is no lock-in period in the case of open-ended funds and the funds can be redeemed any time after purchase. However in the case of tax saving funds a minimum lock-in period of 3 years is applicable.

Redemption proceeds for liquid or debt-oriented units are paid within 1-2 working days. For equity mutual funds, the amount is paid back to investors within 3-4 working days.

Mutual Funds companies called Asset Management Companies ( AMCs) are strictly regulated by SEBI ( Securities and Exchange Board of India ). SEBI is a statutory body under the Securities and Exchange Board of India Act, 1992. SEBI ensures complete transparency in the dealings of AMCs.

You can fix an appointment with us through the Book an Appointment or Request a Call back link above. We will do the needful.