Mutual Funds

The plan should be to find the right plan.

Mutual Funds

Mutual funds offer the perfect solution for a group of investors to effectively pool their money, and invest in a wider variety of securities facilitated by expert fund managers. Mutual fund companies essentially collect the money from their investors, or shareholders, and invest that collective money into individual investment vehicles based on risk profiles, money management philosophies, and financial goals among other important factors.

The mutual fund then passes along the profits (and losses) of those investments to its shareholders. Mutual funds normally come out with a number of schemes which are launched from time to time with different investment objectives. 

Benefits

Professional Money Management

Fund managers are responsible for implementing a consistent investment strategy that reflects the goals of the fund. Fund managers monitor the financial market and economic trends in order to make informed and effective investment decisions.

Diversification

Diversification is one of the best ways to reduce risk. Mutual funds offer investors an opportunity to diversify across assets depending on their investment needs and appetite.

Liquidity

Investors can sell their mutual fund units on any given business day and would receive the current market value on their investments within a short period (normally three- to five-days).

Affordability

Mutual funds are highly affordable for all kinds of people and their financial goals. Some schemes have an initial investment as low as Rs.500.

Convenience

Most private sector funds provide you the convenience of periodic purchase plans, automatic withdrawal plans and an automatic reinvestment of interest and dividends. Mutual funds also provide you with detailed reports and statements that make record-keeping simple. You can easily monitor the performance of your fund by reviewing the business pages of most newspapers or by using our Mutual Funds section.

Flexibility and variety

You can pick from conservative, blue-chip stock funds, sectoral funds, funds that aim to provide income with modest growth or those that take big risks in the pursuit of greater returns. You can even buy balanced funds, or those that combine stocks and bonds in the same fund.

Types of Mutual Funds

Invest and Monitor the performance of your mutual funds through our “MyWealthBridge” portal or app.

FAQs

1 What is an Asset Management Company?
An Asset Management Company (AMC) is a highly regulated organisation that pools money from investors and invests the same in a portfolio. They charge a small fee for fund management.
2 What is NAV?
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. Buying and selling into funds is done on the basis of NAV-related prices. NAV is calculated as follows: NAV= Market value of the fund's investments + Receivables + Accrued Income – Liabilities - Accrued Expenses The performance of a particular scheme of a mutual fund is denoted by Net Asset Value (NAV) and it varies on daily basis. 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 NAV per unit of the fund is Rs.20.
3 How often is the NAV declared?
NAV is required to be disclosed by the mutual funds on a regular basis – on all business days or weekly – depending on the type of scheme. As per SEBI Regulations, the NAV of a scheme shall be calculated and published at least in two daily newspapers at intervals not exceeding one week. The NAVs are also available on the websites of mutual funds. All mutual funds are also required to put their NAVs on the website of Association of Mutual Funds in India (AMFI) www.amfiindia.com , so that the investors can access NAVs of all mutual funds at one place.
4 What is Entry Load?
The non-refundable fee paid to the Asset Management Company at the time of purchase of a mutual fund unit is termed as Entry Load. Entry Load is added to the NAV (purchase price) when you are purchasing Mutual Fund units.
5 What is Exit Load?
The non -refundable fee paid to the Asset Management Company at the time of redemption/ transfer of units between schemes of mutual funds is termed as Exit Load. It is deducted from the NAV (selling price) at the time redemption/ transfer.
Purchase price is the price paid by you to purchase a unit of a mutual fund scheme. If the fund levies an entry load, then the purchase price would be equal to the sum of the NAV and the entry load levied.
Redemption price is the price received on selling units of an open-ended scheme. If the fund does not levy an exit load, the redemption price will be same as the NAV. The redemption price will be lower than the NAV in case the fund levies an exit load.
Repurchase price is the price at which a close-ended scheme repurchases its units. Repurchase can either be at NAV or can have an exit load.
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 to meet their changed investment needs, risk profiles or other changing circumstances during their lifetime.
There is no lock-in period in the case of open-ended funds. However, in the case of tax saving funds, the minimum lock-in period is three years.
The performances of Mutual funds are largely a combination of the stock market’s performance and the economy as a whole. Equity Funds are influenced to a large extent by the stock market. The stock market in turn is influenced by the performance of the companies and other factors governing the economy. The performance of the sector funds depends to a large extent on the companies within that sector. Bond-funds are influenced by interest rates and credit quality. As interest rates rise, bond prices fall, and vice versa. Similarly, bond funds with higher credit ratings are less influenced by changes in the economy.
No, there are other types of Mutual Funds that do not invest in equity but in bonds issued by banks, companies, government bodies and money market instruments (bank CDs, T-bills, Commercial Papers,) which have lower risk but also offer lower returns compared to equity funds. These funds are better suited as alternatives to traditional options like bank fixed deposits or PPFs. Hence if you are looking to invest your money in places that can give you better returns than a bank or post office FD, and still be more tax efficient, Debt Mutual Funds could be a great option.
When you park your money in a bank Fixed Deposit (FD), the bank promises to pay fixed interest in return. Here you’ve lent money to the bank, and the bank is a borrower of your money, owes you a fixed periodic interest. Debt Mutual Funds invest in debt securities like Government bonds, Company bonds, Money Market Securities. Bonds are issued by corporates like power companies, banks, home finance companies and the Government. These bond issuers promise to pay their investors (those who buy their bonds), a periodic interest in return for their money invested in the bonds. Bond issuers are like the bank (borrower) in our FD example, borrowing money from investors and promising to pay periodic interest. While you are the investor in a bank FD, Debt Funds are the investors in these bonds. Just like you earn interest from an FD, Debt Funds earn periodic interests from their bond’s portfolio. Unlike assured interest from FDs, periodic interest payments to fixed income Debt Funds from these bonds can be fixed or variable without any guarantee. When they sell bonds from their portfolio, they get the principal back. When you invest in a Fixed Income Mutual Fund, you indirectly invest in its bond portfolio, spreading the risk across different bond issuers. You benefit from such risk diversification.

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