We attempt to bring you latest opportunities available in the mutual fund sector in India. We hope the FAQs, articles and investment options brought to you in these pages enable more informed decision-making. It should not however be viewed as a substitute for professional advice based on the latest legal position and facts and circumstances of each case.

A risk return analysis of mutual funds viz. Diversified Equity- Balance -Monthly Income- Income- Index- Liquid- Floating schemes since inception.

Click here to read

A Monthly Income Plan is a medium term bond fund with a little equity icing on the top. With both debt and equity markets hip hopping in the most volatile manner, MIPs could well be the answer to most investor problems.  Click here to read

'Buy low and sell high'- easiest way to earn money on the stock market. But timing the stock market right is obviously not easy. This article explores the benefits of a Systematic Investment Plan and concludes ...

'It is the time and not the timing that matters!'.   Click here to read

We have attempted to answer frequent queries on mutual funds by investors- how to choose a scheme, should one select a scheme with a lower NAV...

• What is a Mutual Fund?
• How do mutual funds give returns?
• What are the benefits of investing in a mutual fund?
• How are mutual funds classified by maturity- open or close ended?
• How are mutual funds classified by investment objective- growth, regular income etc.?
• What are sector specific funds/ schemes?
• What is a load or no load fund?
• What is an assured return scheme?
• What is NAV?
• How to choose a scheme for investment from a number of schemes available?
• How much should one invest in debt or equity schemes?
• If schemes in the same category of different mutual funds are available, should one choose a scheme with lower NAV?
• How to know the performance of a mutual fund scheme?
• How to know where the mutual fund scheme has invested money mobilized from the investors?
• What is Systematic Investment Plan?
• What is a Systematic Withdrawal Plan?
• What is a Switching Facility?
• What is the applicable NAV for switch?
• What is a Systematic Transfer Facility?
• How can Non resident Indians (NRIs) invest in Mutual Funds in India?
• How can Non resident Indians (NRIs) withdraw / redeem his investments?
  

If you have any other query, do not hesitate to Ask Us.

Mutual fund is a mechanism for pooling the resources by issuing units to the investors and investing funds in securities in accordance with objectives as disclosed in offer document.

Mutual funds give returns by way of:

• Dividend
• Capital appreciation

The benefits of mutual funds are as follows:

• Professional Management
• Diversification of Risk.
• Relatively cost effective
• Transparency
• Liquidity
• Choice
• Flexibility
• Convenience
• SEBI regulated
  

Mutual fund schemes are either open ended or close ended.

Open Ended Scheme	Close Ended Scheme
Always open for investment	Open for Fixed Period only
Always open for refund	Traded through secondary Market
No fixed Corpus	Fixed corpus

Mutual funds are classified by investment objective as follows:

Growth/ Equity oriented Scheme
These schemes aim to provide capital appreciation to an investor over the long-term. Majority of the corpus is invested in equities and equity related instruments. It is suitable for those investors who are willing to accept the risks and volatility associated with the capital markets.

Debt/ Income oriented Scheme
These schemes aim to provide a regular income to the investor. Investments are made in fixed income securities such as debentures, bonds and money market instruments. It is suited to investors seeking a stable return while enjoying medium to low risk.

Balanced Fund
This scheme type provides a balanced exposure to both growth and income producing assets so as to provide regular income as well as capital appreciation. It is suitable for an investor seeking long-term growth and does not wish to accept the risks of investing solely in equities.

Money Market / Liquid Fund
These schemes aim to provide liquidity along with a modest capital appreciation. Investments are restricted to money market instruments such as Government Securities, Treasury Bills, Commercial Paper, Certificates of Deposit, Bill Rediscounting etc. This is suitable for an investor seeking very high liquidity and low principal risk.

Index Fund
The main objective of these schemes is to replicate the performance of a particular index such as the NSE 50 or the BSE Sensex. Index fund schemes are ideal for investors who are satisfied with returns commensurate with the index.

Gilt Fund
These funds invest exclusively in government securities. Government securities have no default risk. NAVs of these schemes also fluctuate due to change in interest rates and other economic factor as is the case with income or debt oriented schemes.

Sector specific funds invest in the securities of only those sectors or industries as specified in the offer documents. e.g. Pharmaceuticals, Software, Fast Moving Consumer Goods (FMCG), Petroleum stocks, etc. The returns in these funds are dependent on the performance of the respective sectors/industries. While these funds may give higher returns, they are more risky compared to diversified funds. Investors need to keep a watch on the performance of those sectors/industries and must exit at an appropriate time. They may also seek advice of an expert.

A Load Fund is one that charges a percentage of NAV for entry or exit. That is, each time one buys or sells units in the fund, a charge will be payable. This charge is used by the mutual fund for marketing and distribution expenses. Suppose the NAV per unit is Rs.10. If the entry as well as exit load charged is 1%, then the investors who buy would be required to pay Rs.10.10 and those who offer their units for repurchase to the mutual fund will get only Rs.9.90 per unit. The investors should take the loads into consideration while making investment as these affect their yields/returns. However, the investors should also consider the performance track record and service standards of the mutual fund that are more important. Efficient funds may give higher returns in spite of loads.

A no-load fund is one that does not charge for entry or exit. It means the investors can enter the fund/scheme at NAV and no additional charges are payable on purchase or sale of units.

In an assured return scheme, the redemption consideration are guaranteed. The investor is assured to receive a fix return during the investing period. Such schemes are generally time bound and offer less liquidity.

Net Asset Value is the value of a mutual fund scheme applicable to one unit. This is calculated as total assets minus all prior charges and divided by the number of total outstanding units. In simple terms it is the market value of the assets of the scheme minus its liabilities.

Before embarking on the strategy for investment in mutual funds it is important to analyze the funds on various parameters. The data for evaluating a mutual fund can be found in prospectus, quarterly and annual reports of the fund. The following parameters should be used in analyzing a fund and its management: -

• Historical Returns
• Dividend History
• The Expenses Ratio
• Portfolio turnover rate
• Size of the fund
• Age of the fund
• Cost of ownership – Entry / Exit Loads
• Portfolio Composition
• Portfolio Risk Statistics – Beta/Standard Deviation / Duration etc.

Investment in debt or equity depends on various parameters and may differ from person to person. The proportion of debt and equity depends on following factors: -

• Risk appetite
• Investment objective
• Liquidity
• Investment horizon

No. In case of mutual funds schemes, lower or higher NAVs of similar type schemes of different mutual funds have no relevance. Lower NAV does not indicate a lower cost for investor. The NAV depends on the current value of the holding of a scheme. Investors should choose a scheme based on its merit considering performance track record of the mutual fund, service standards, professional management, etc.

Example
Suppose scheme A is available at a NAV of Rs.15 and another scheme B at Rs.90. Both schemes are diversified equity oriented schemes. Investor has put Rs. 9,000 in each of the two schemes. He would get 600 units (9000/15) in scheme A and 100 units (9000/90) in scheme B. Assuming that the markets go up by 10 per cent and both the schemes perform equally good and it is reflected in their NAVs. NAV of scheme A would go up to Rs. 16.50 and that of scheme B to Rs. 99. Thus, the market value of investments would be Rs. 9,900 (600* 16.50) in scheme A and it would be the same amount of Rs. 9900 in scheme B (100*99). The investor would get the same return of 10% on his investment in each of the schemes. Thus, lower or higher NAV of the schemes and allotment of higher or lower number of units within the amount an investor is willing to invest, should not be the factors for making investment decision. Likewise, if a new equity oriented scheme is being offered at Rs.10 and an existing scheme is available for Rs. 90, should not be a factor for decision making by the investor. Similar is the case with income or debt-oriented schemes.

On the other hand, it is likely that the better-managed scheme with higher NAV may give higher returns compared to a scheme that is available at lower NAV but is not managed efficiently. Similar is the case of fall in NAVs. Efficiently managed scheme at higher NAV may not fall as much as inefficiently managed scheme with lower NAV. Therefore, the investor should give more weightage to the professional management of a scheme instead of lower NAV of any scheme. He may get much higher number of units at lower NAV, but the scheme may not give higher returns if it is not managed efficiently.

The performance of a scheme is reflected in its net asset value (NAV) that is disclosed on daily basis in case of open-ended schemes and on weekly basis in case of close-ended schemes. The NAVs of mutual funds are required to be published in newspapers. The NAVs are also available on the web sites of mutual funds. All mutual funds are also required to put their NAVs on the web site of Association of Mutual Funds in India (AMFI) http://www.amfiindia.com and thus the investors can access NAVs of all mutual funds at one place. Click here for performance updates

The mutual funds are also required to publish their performance in the form of half-yearly results that also include their returns/yields over a period of time i.e. last six months, 1 year, 3 years, 5 years and since inception of schemes. Investors can also look into other details like percentage of expenses of total assets as these have an affect on the yield and other useful information in the same half-yearly format.

The mutual funds are also required to send annual report or abridged annual report to the unit holders at the end of the year.

Investors can compare the performance of their schemes with those of other mutual funds under the same category. They can also compare the performance of equity-oriented schemes with the benchmarks like BSE Sensitive Index, S&P CNX Nifty, etc.

On the basis of performance of the mutual funds, the investors should decide when to enter or exit from a mutual fund scheme.

Many open-ended mutual funds offer a Systematic Investment Plan to encourage regular investments. This program allows unit holders to save a fixed amount of rupees every month / quarter by purchasing additional units of the Scheme(s). Under this plan, unit holders can benefit by investing specified rupee amounts periodically. This concept is called Rupee Cost Averaging.

Example
Let us take an example of a unit holder who invests Rs. 100 per month in a scheme that had a unit price of Rs. 10 initially. Over the next few months, the market falls (causing the unit price to drop) before recovering to its original value.

At the end of 5 months the Unit holder would have 65 units each worth Rs. 10. He would therefore have Rs. 650 worth of units after investing Rs. 500 and therefore have a profit of Rs. 150.

Month	NAV	Investment (Rs.)	No. of Units	Average Cost (Rs.)
1	10	100	10.0	10.0
2	8	100	12.5	8.89
3	5	100	20.0	7.06
4	8	100	12.5	7.27
5	10	100	10.0	7.69
Total		500	65.0	7.69

Rupee Cost Averaging does not guarantee a profit or protect against a loss. Rupee Cost Averaging can smooth out the market's ups and downs and reduce the risk of investing in volatile markets.

The unit holder may set up a Systematic Withdrawal Plan on a monthly, quarterly or semi-annual or annual basis to:

• Redeem a fixed number of units
• Redeem enough units to provide a fixed amount of money
  

Switching facility provides investors with an option to transfer the funds amongst different types of schemes or plans.

Investors can opt to switch units between Dividend Plan and Growth Plan at NAV based prices. Switching is also allowed into/from other select open-ended schemes currently within the Fund family or schemes that may be launched in the future at NAV based prices.

Switch requests are affected the day the request for switch is received. The Applicable NAV for the switch will be the NAV on the day that the request for switch is received.

It is a Systematic Switching request by the unit holder to exchange a fixed number of units and /or amount from one scheme to another within the Fund family on a monthly, quarterly, semi-annual or annual basis.

All investments made by Non Resident Indians (other than those out of Rupee funds/ NRO account) in Mutual Funds are eligible for full repatriation benefits without limits. Below is a step-by-step process on how to invest in Mutual Fund products.

Step 1
Obtain an application form of the fund you want to invest. (You can e-mail us your address for a copy to be mailed to you).

Step 2
Complete the application form and make the payment for the amount you wish to invest using:

• NRE account Cheque
• NRO account Cheque (investment on non-repatriation basis)
• FCNR account Cheque
• A Rupee draft purchased abroad
• A Dollar / Pound Sterling / Deutschemark / Yen draft purchased abroad

Step 3
Mail the completed application form and Cheque /draft either to the distributor or directly to AMC

Step 4
Units of the fund indicated by you will be allotted on the date of receipt of your application at our office at the applicable NAV-based price for that day. If the mode of payment is through a foreign currency draft, the allotment shall be made based on the date of realization.

Step 5
An Account Statement will be mailed by the AMC within 3 working days of processing your request.

Following is a step by step by step process by which NRI withdraw / redeem his investments: -

Step 1
You can redeem all or part of the amount in your account by signing on the tear-off portion of the account statement and sending it to the mutual fund distributor or directly to the AMC through post.

Step 2
The redemption request will be processed at the applicable NAV based price. Redemption proceeds will be paid by a payable at par Cheque and payments will be made in favour of the first unit holder and the bank account number shall be mentioned on the Cheque as well. The redemption proceeds will be net of tax deduction at source on the profits.

Redemption proceeds/repurchase price and/or dividend or income earned (if any) will be payable in Indian Rupees only. The Scheme will not be liable for any loss on account of exchange fluctuations, while converting the rupee amount in US Dollar or any other currency. Repatriation of sale proceeds and dividend

Repatriation of sale proceeds/ dividend can be made based on an undertaking by the remitter and a Chartered Accountant certificate with respect to tax compliance.