An investor must mention clearly his name, address, number of units applied for and such other information as required in the application form. Know your Customer (KYC) documents need to be submitted by a first time investor
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 X 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, 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.
Yes, non-resident Indians can also invest in mutual funds. Necessary details in this respect are given in the offer documents of the schemes.
Yes, it is not only possible, but can also be an alternative to RD (recurring deposit) in banks and is advantageous over RDs from tax point of view.
It’s not advised to do so because the investor will lose out on the benefit he could have earned by staying invested i.e., he can purchase more units of a scheme with the same amount of money as he was spending earlier when the markets are rising and had higher NAVs (net asset value).
Yes, there is a difference. Initial Public Offering (IPO) is offered by a company to directly raise money for the company as per the stated objective. In the case of mutual funds, the money garnered is used for investing in eligible securities such as equity and debt instruments of companies, money market instruments, gold, etc. Thus, a mutual fund acts as an intermediary between investors and companies.
These are the funds/schemes which invest in the securities of specific sectors or industries only 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.
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.
A scheme that invests primarily in other schemes of the same mutual fund or other mutual funds is known as a FoF scheme. It spreads risks across a greater universe.
A FoF scheme enables the investors to achieve greater diversification through one scheme by investing in a fund which may not be available for investment in a country e.g. Edelweiss has a fund named Edelweiss Greater China Equity Off-shore Fund in India which invests in JPMorgan Funds – JF Greater China Fund; which is not available in India, which makes it easier for Indians to seek it’s benefits without investing in foreign equity.
A capital protection-oriented scheme is typically a hybrid scheme that invests significantly in fixed-income securities and a part of its corpus in equities. These are close-ended schemes that come in tenors of fixed maturity e.g. three to five years.
Structure of the scheme – Example If the fund collects INR 100, it invests INR 80 in fixed-income securities and INR 20 in equities or equity related instruments. The money is invested in such a way that the INR 80 portion is expected to grow to become INR 100 in three years (assuming that the scheme has a maturity period of three years).
Thus, the aim is to preserve the INR 100 capital till maturity of the scheme. Thus, the scheme is oriented towards protection of capital and not with guaranteed return.
Open-end funds are not open for issue for a limited time period and these funds determine the market value of their assets at the end of each trading day. Their NAV changes daily because of market fluctuations of the stock and bond prices in the fund.
Closed-end funds issue a fixed number of shares that are traded on the stock exchanges or in the over-the-counter (OTC) market. When the shares are sold, the fund does not issue more shares.closed-end funds do not trade at their NAVs. Instead, their share prices are based on the supply of and demand for their funds and other fundamental factors. Consequently, closed-end funds can trade at premiums or discounts to their NAVs.