A Mutual Fund is a body corporate registered with the Securities and Exchange Board of India (SEBI), that pools up the money from individual / corporate investors and invests the same on behalf of the investors /unit holders, in equity shares, Government securities, Bonds, Call money markets etc., and distributes the profits. In other words, a mutual fund allows an investor to indirectly take a position in a basket of assets.
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A systematic investment plan is one where an investor contributes a fixed amount every month and at the prevailing NAV the units are credited to his account. Today many funds are offering this facility.
Unit Trust of India is the first Mutual Fund set up under a separate act, UTI Act in 1963, and started its operations in 1964 with the issue of units under the scheme US-64.
Currently public sector banks like SBI, Canara Bank, Bank of India, institutions like IDBI, GIC, LIC Foreign Institutions like Alliance, Morgan Stanley, Templeton and Private financial companies like Kothari Pioneer, DSP Merrill Lynch, Sundaram, Kotak Mahindra etc. have floated their own mutual funds.
NAV is the net asset value of the fund. Simply put it reflects what the unit held by an investor is worth at current market prices. For details on calculation methodology and formulae, please click on our mutual fund glossary.
Presently there are 33 Mutual Funds in India and close to 400 mutual fund schemes. We will very soon be putting up detailed analysis of major schemes operating in India.
Once again this decision will depend on factors like your income, risk aversion and tax status. We at www.karvy.com are shortly putting up a personal portfolio analyzer where based on your income, expenditure, investments, tax status etc. we will advice you on the proportion you need to allocate to mutual funds.
Securities Exchange Board of India (SEBI) is the regulatory body for all the mutual funds mentioned above. All the mutual funds must get registered with SEBI. The only exception is the UTI, since it is a corporation formed under a separate Act of Parliament.
As per Sebi Regulations, mutual funds are not allowed to assure returns. However, funds floated by AMCs of public sector banks and financial institutions were permitted to assure returns to the unitholders provided the parent sponsor was willing to give an explicit guarantee to honor such a commitment. But in general, mutual funds cannot assure fixed returns to their investors.
For a retail investor who does not have the time and expertise to analyze and invest in stocks and bonds, mutual funds offer a viable investment alternative. This is because:
Investors need to be clear that mutual funds are essentially medium to long term investments. Hence, short-term abnormal profits will not be sustainable in the long run. But in the medium to long run the mutual funds tend to outperform most other avenues of investments at the same time avoiding the risk of direct investment accompanied with professional fund management.
An entry load is an additional cost that an investor pays at the point of entry. Assume that your proposed investment is Rs.10,000/-. Also assume that the current NAV of the fund is Rs.12.00 and that the entry load is Rs.0.50. Then you will receive 10000/12.50 = 800 units. For detailed explanation of entry load, refer our mutual fund glossary.
An exit load is levy that an investor pays at the point of exit. This is levied to dissuade investors from exiting the fund. Assume that the current NAV of the fund is Rs.12.00 and that the exit load is Rs.0.50. Now if you sell 800 units then you stand to receive 800X11.5 = Rs. 9200. For detailed explanation of exit load, refer our mutual fund glossary.
Yes. One can redeem part units also.
In an open-ended mutual fund there are no limits on the total size of the corpus. Investors are permitted to enter and exit the open-ended mutual fund at any point of time at a price that is linked to the net asset value (NAV). In case of closed-ended funds, the total size of the corpus is limited by the size of the initial offer.
For resident unitholders, currently no tax is deducted at source irrespective of the amount redeemed. In case of non resident tax is deducted at source at the applicable tax rates. It may be noted that the above is indicative and is subject to changes in accordance with the tax laws.
Yes.An NRI investor can have a joint holder with a resident Indian or a Non-resident Indian.
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