Mutual fund is a mechanism for pooling money by issuing units to the investors and investing funds in securities in accordance with objectives as disclosed in offer document. Investments in securities are spread across a wide cross-section of industries and sectors and thus the risk is diversified because all stocks may not move in the same direction in the same proportion at the same time. Mutual funds issue units to the investors in accordance with quantum of money invested by them. Investors of mutual funds are known as unit holders. The profits or losses are shared by investors in proportion to their investments. Mutual funds normally come out with a number of schemes which are launched from time to time with different investment objectives. A mutual fund is required to be registered with Securities and Exchange Board of India (SEBI) before it can collect funds from the public.

NAV is the market value of the securities held by the scheme. Since market value of securities changes every day, NAV of a scheme also varies on day today basis. The NAV per unit is the market value of securities of a scheme divided by the total number of units of the scheme on any particular date. For example, if the market value of securities of a mutual fund scheme is INR 200 lakh and the mutual fund has issued 10 lakh units of INR 10 each to the investors, then the NAV per unit of the fund is INR 20(i.e.200 lakh/10 lakh). NAV is required to be disclosed by the mutual funds on a daily basis.

These are the funds/schemes which 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, Information Technology (IT), Banks, 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 with 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.

These schemes offer tax rebates to the investors under specific provisions of the Income Tax Act, 1961 as the Government offers tax incentives for investment in specified avenues, for example, Equity Linked Savings Schemes (ELSS) under section 80C and Rajiv Gandhi Equity Saving Scheme (RGESS) under section 80CCG of the Income Tax Act, 1961. Pension schemes launched by mutual funds also offer tax benefits. These schemes are growth oriented and invest pre-dominantly in equities. Their growth opportunities and risks associated are like any equity-oriented scheme.

The price or NAV a unit holder is charged while investing in an open-ended scheme is called sales price. Repurchase or redemption price is the price or NAV at which an open-ended scheme purchases or redeems its units from the unit holders. It may include exit load, if applicable. What is expense ratio? Expense ratio represents the annual fund operating expenses of a scheme, expressed as a percentage of the fund’s daily net assets. Operating expenses of a scheme are administration, management, advertising related expenses; etc. An expense ratio of 1% per annum means that each year 1% of the fund’s total assets will be used to cover expenses. Information on expense ratio that may be applicable to a scheme is mentioned in the offer document. Currently, in India, the expense ratio is fungible, i.e., there is no limit on any particular type of allowed expense as long as the total expense ratio is within the Prescribed limit.

A SIP allows an investor to invest regularly. One puts in a small amount every month that is invested in a mutual fund. A SIP allows one to take part in the stock market without trying to second-guess its movements. For example decides to invest INR 1,000 per month for a year.

When the market price of shares fall, X benefits by purchasing more units; and is protected by purchasing less when the price rises

Yes. The nomination can be made by individuals applying for/holding units on their own behalf singly or jointly. Non individuals including society, trust, body corporate, partnership firm, Karta of Hindu Undivided Family, holder of Power of Attorney cannot nominate.

Mutual funds have multiple benefits in comparison to other single investment.

  • Low Risk - It gives you your diversified interest rates. Interest received on various diversified mutual funds with respect to its weightage.
  • Well Regulated - All Mutual Funds are registered with SEBI and they function within the provisions of strict regulations designed to protect the interests of investors.
  • Professional Management - The services of experienced and skilled professionals and dedicated investment research team.
  • Diversification – Mutiple investment option to select from. Invest in a number of companies of different industries and sectors.
  • Tax Deductions – Help you save your money. Gives you tax benefits if invest for more than an year.
  • Return Potential – ROI is on an average is better and good returns in comparison to other investment instruments.
  • Low Costs - Less expensive to directly investing in the capital markets because the benefits of reduction in share brokerage which translate into lower costs for investors.
  • Transparency - Get frequent alerts on the value of your investment.
  • Flexibility – Through Systematic Investment Plans (SIP), Systematic Withdrawal Plans (SWP) and dividend reinvestment plans. 

There are certain criteria to determine the best mutual funds for you. They are mentioned as below:

  • How much is your risk appetite low, moderate low, moderate, moderate high, high
  • Based on the portfolio and past performance
  • Based on asset class such as equity, debt, money market, hybrid or balanced, sector, index, tax saving funds
  • Based on structure such as open ended, close ended, interval schemes
  • Based on investment objective like growth funds, income funds, liquid funds
  • Based on goals such as Aggressive growth funds, growth funds, balanced funds, Income funds, Money market funds
  • Based on capitalization large cap, mid cap, small cap

Any investment made under ELSS(Equity Linked Saving Scheme) mutual fund are eligible for a tax deduction u/s 80C of the Income Tax Act.

Tax-free capital gains/dividends under ELSS(Equity Linked Saving Scheme) mutual fund scheme are eligible for tax deduction

You can withdraw your investments anytime from your Vedant Asset Investment Dashboard at a click of a button. After redemption, the money is usually transferred to your registered bank account directly within few business working days. Tax saving funds(ELSS) have a 3 year lock-in after which you can redeem.

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Mutual Fund investments are subject to market risks. Read all scheme related documents carefully. Past performance is not an indicator of future returns. ARN-104974