Investing in mutual funds is like investing your money on auto pilot mode where instead of your taking any investment decisions, a mutual fund company hires experienced fund managers who are responsible to take most significant decisions regarding investing your money. Mutual fund companies create a pool of investment from investors and invest this pooled money in various securities.
Mutual funds are managed by professionals who have expertise in financial market. The pooled money invested by various investors is invested in various securities. Mutual fund companies decide when to invest, where to invest and how much money should be invested in a specific financial asset class. Generated profit is distributed among investors as per the proportion of their investments.
Yes, mutual funds are regulated by Security and Exchange Board of India (SEBI). SEBI makes the policies for mutual funds and also regulates the mutual fund industry. SEBI constantly lays guidelines for the mutual funds to safeguard the investors’ interest.
Investors need to understand that mutual funds do not guarantee any returns. All mutual funds have some amount of risk. However, the risk varies from case to case. You should always choose your mutual funds based on your goals, investment horizon and risk profile. If you are investing for short term you may choose the debt mutual funds, on the contrary if you are investing for a long period, you may consider investing in equity mutual funds. You can also choose a blend of debt & equity or combination of various investment instruments like, SIP, STP, SWP etc to mitigate the risk. You should choose mutual funds based on your risk profile and financial objectives.
ICICI Prudential, Aditya Birla Sun Life, HDFC, Axis Fund, Mirae assets, Kotak are some of the top mutual fund companies in India.
A direct Plan of any mutual fund scheme is a plan that lets an investor to invest in mutual funds by interacting directly with the Asset Management Company (AMCs), without involving a broker or distributor. Investors are free to invest in direct Plans, as per the needs and demands of their portfolio.
A regular plan is mutual fund plan where you are investing through an intermediary like advisor, broker, or distributor. In a regular plan, the mutual fund company pays a commission to such intermediaries.
A lot of investors have variety of financial goals at regular intervals and they do not know to achieve them so you will need a person who can guide you through the ups and downs in the market to reach your financial goals that you have planned throughout your life span. Financial advisors showcase the best techniques on how you can save your money, invest it in various financial assets through a range of platforms and ultimately grow your fortune over a period of time. If you have specific financial goals like tax planning, retirement plans, education planning for kids, buying house etc they can help you in understanding your goals from the investment point of view and provide you with a set of asset allocations so that you can reach your goals in desired time.
Mutual fund companies usually collect some amount when they join or leave a particular mutual fund scheme. This fee is called load. There are two types of loads in mutual funds; entry load and exit load. The amount charged while entering a scheme is called entry load while the amount charged while leaving the scheme (redemption) is call exit load. SEBI has discontinued the entry load since August 2009. Equity scheme exit load is 1% in case withdrawal is made within 12 months of investment date, on the other hand, there is not exit load if withdrawal is made after 12 months. However exit load varies from scheme to scheme for Debt Schemes.
Yes, cash investments up to INR 50,000 per investor, per mutual fund, per financial year can be made in mutual funds. However, any repayment (redemption/dividend) is made only through bank channel.
Systematic Investment Plan (SIP) is an investment technique or financial instrument offered by many mutual fund companies through which an investor can invest small amounts in mutual funds periodically instead of lump sums. With the help of financial advisors, one can properly structure the SIP and set the investment frequency as fortnightly, monthly or quarterly depending on individual’s cash flow.
SIP draws benefits from rupee cost averaging and hence it is the best strategy for investing in volatile market for efficient risk mitigation. For example, if you start your investments of Rs. 5000 per month via SIP, the money will be debited from your account every month and will be invested in the mutual funds that you have chosen for systematic investment plan (SIP). Hence SIP is known as the most disciplines way of investing money to achieve your financial goals.
Systematic Transfer Plan (STP) is an investment strategy where an investor regularly transfers a fixed amount of money from a Source scheme (usually debt fund) to Target scheme (usually an equity fund). One of the major differences in SIP and STP is the source of investment. In case of SIP, the money comes directly from investor’s bank account while in STP; money is transferred from a debt fund.
Let’s say if you want to invest Rs. 10 lakhs in an equity fund through an Systematic Transfer Plan (STP), first you will have to choose a debt fund which allows STP to invest in that particular equity fund. Once you choose both the equity as well as the debt plan, you will then need to invest the whole amount i.e. is Rs. 10 Lakhs in the selected debt fund. You will have an option to transfer the money from debt fund to equity fund by choosing the suitable investment frequency.
Systematic Withdrawal plan (SWP) is an investment facility offered by mutual funds where an investor can withdraw a certain amount of money (pre-determined) at regular intervals (pre-defined) from his or her mutual fund schemes. SWP is similar to SIP but it provides an option to generate regular income from your lump sum investment.
SWP works exactly opposite of Systematic Investment Plan (SIP). Once you invest lump sum amount in SWP, you direct your regular withdrawals from mutual fund scheme to your saving bank account whereas as in SIP, you direct your regular investments from bank account savings into the preferred mutual fund scheme. SWP is also one of the best strategies to deal with market volatility.
Asset Value (NAV) is simply the current market value of a mutual fund unit. This market value per fund unit determines the current overall cost of mutual fund. NAV is simply the price per share of the fund. Likewise shares have a share price; mutual funds have a net asset value. The performance of a particular scheme of a Mutual Fund is indicated by Net Asset Value (NAV)
The term New Fund Offer (NFO) in mutual funds is similar to IPO (Initial Public Offering) in share market. It is an opportunity to subscribe to a particular scheme through limited period offer. Mutual fund companies offer investors to purchase mutual fund units within pre-defined offer period through an offer price. NFO investors usually generate good returns post listing.
ELSS or Equity Linked Savings Schemes are mutual fund investment schemes that help investors to save income tax. Hence they are also known as tax-saving funds. These schemes invest a large percentage of their portfolio in equity and they have a compulsory lock-in period of 3 years for tax saving purpose, which is the shortest amongst all tax saving instruments.
Although you can directly invest in mutual funds through direct plans, it is advisable to invest in mutual funds through a financial advisor who can help you in identifying and achieving your financial goals. Financial advisor can take care of your KYC process, selection of fund, redemption etc. As far as direct plan is concerned, you need to follow steps like registration of fund site, provide your KYC details, fill nominee details, provide bank details, selection of funds, making payment etc.
A person who is looking for tax saving, professional management of portfolio, stable growth, regular investment option, good liquidity, better returns, ease of investment, protection against inflation should invest in mutual funds.
The essence of a successful financial planning is that you keep a long-term horizon to optimize your returns without risking the safety of your investment or affecting the liquidity. Mutual funds meet all these criteria, making them a right choice to include into your portfolio as compared to other investment options like FD, gold, real estate, PPF, share market etc.
The consolidated account statement (CAS) is a single document which contains the details of transactions and investments across mutual funds and other depository accounts that an investor might have.
National Securities Depository Limited (NSDL) and AMCs (Asset Management Companies) send monthly account statement where you can track the performance of your portfolio. You can also login to your portfolio through Chitale Financial Solutions’s website or app to track the fund performance or your investment journey.
NRIs are allowed to invest in mutual funds in India on a repatriable or non-repatriable basis subject to regulations prescribed under the Foreign Exchange Management Act (FEMA). For general NRIs (not from USA and Canada) the process of investing in Indian mutual funds is as simple as it is for the Indian investors. They just need to comply by certain norms set by the country they are based in.
It totally depends on the financial goals and the risk appetite of an investor. It may vary from person to person according to financial objectives. Your mutual fund distributors could help you out in choosing the best debt or equity funds as they are more aware about the funds and market performances.
You can check the fund fact sheets available on Chitale Financial Solutions’s website or from AMC’s website. Fund fact sheets can help you to look at some important parameters like alpha ratio, sharpe ratio, expense ratio, portfolio allocation, rolling returns etc which decide the performance of a mutual fund scheme.
Yes, you can appoint a nominee. However, nomination facility is just a convenience; it does not give any legal rights of ownership to the nominee and can be challenged in the court of law. It is always advisable to prepare a will in advance so that there is a transparency in the ownership of financial assets.
Chitale Financial Solutions offer Capital Gains Bond under Section 54EC of the Income Tax Act, 1961. These bonds are being issued as ‘Long term specified assets’ within the meaning of Explanation (b) to sub-section (3) of Section 54-EC of the Income Tax Act, 1961. Those desirous of availing exemption from capital gains tax under Section 54 EC may invest in these bonds. Capital gains arising from transfer of Long-term capital assets can be invested in these bonds within a period of six months from the date of transfer of the asset for getting exemption from the capital gains tax. Such Bonds are issued by SIDB, NHB, NHAI and REC.
Term insurance plans are much easier to understand and provides affordable coverage than other insurance plans such as endowment policies which combine risk cover with savings. The premiums of term plans are much lower than other plans.
Health insurance is very important to safeguard yourself and your family. Expenses from unforeseen illness can drain your saving. If you cover yourself and your family with adequate health insurance, you can manage your medical expenditure without disturbing your savings. Some insurance provider also offers cashless treatment so you need not to worry about reimbursements.
Rupee cost averaging helps us to against the volatility of the market. In the rupee cost averaging approach, you invest a fixed amount of money at regular intervals irrespective of whether the markets are going up or down. The rupee cost averaging ensures that one can buy more units when the markets are low and lesser units when they are high. This approach helps an investor to bring down the average cost per unit over the long-term.
Mutual fund investment system is deliberately constructed to make best out of the power of compounding. When you keep your money invested for long term, you get maximum benefits from compounding. Let’s check an example to understand the beauty of compounding. If you are a fresh graduate and have recently joined a company at the age of 25 years, investing at least Rs.5000 per month (considering investment returns of 15%) can give you more than 1 Crore (1 Crore 64 lakhs precisely) at the age of 50 years (just 25 years down the line). Not sure about this, click the below link and check for yourself. On the other hand, if you invest the same amount at age of 35 years by losing first ten promising years of your employment from investment perspective, you will accumulate only 33 lakhs at the age of 50 years. That’s a loss of whopping 70 lakhs plus. So investing early is the key to get advantage from compounding.
For mutual fund investments, you need to submit KYC documents as identity proof (PAN card, passport, Aadhar Card, Photograph, Driving License, and Voter ID) and address proof (passport, Aadhar Card, Photograph, Driving License, Voter ID, utility bills, bank account statement, and passbook). For online payments, you can present either bank statement or cancelled cheque.