Frequently Asked Questions

Q1. What is a Mutual Fund?

A mutual fund is a trust. It pools money from like-minded shareholders and invests in a diversified portfolio of securities, through various schemes that address different needs of investors. The securities a mutual fund invests in is based on the investment objective of a particular scheme. Such objective is clearly laid down in the Offering document for that scheme. The fund adds value to the investment in two ways: income earned and any capital appreciation realized through sale. This is shared by unit holders in proportion to the number of units they own.

Q2. What are the different types of mutual fund schemes?
Mutual fund schemes can be classified as follows:
By Structure

Open-ended schemes: An Open-end Fund is one that is available for subscription all through the year. These do not have a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value ("NAV") from the Asset Management Company (AMC) related prices.
Close-ended schemes: A Close-ended Fund is open for subscription only during a specified period. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the Stock Exchanges where they are listed.

By Investment Objective

1.              Money Market Funds : The aim of Money Market Funds is to provide easy liquidity, preservation of capital and moderate income. These schemes generally invest in safer short-term instruments such as Treasury Bills, Certificates of Deposit, Commercial Paper and Inter-Bank Call Money. Returns on these schemes may fluctuate depending upon the interest rates prevailing in the market. These are considered very low risk schemes.

2.              Income schemes : The aim of Income Funds is to provide regular and steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures and Government securities. Income Funds aim to provide capital stability and regular income. These are considered low risk schemes.

3.              Balanced schemes : The aim of Balanced Funds is to provide both growth and regular income. Such schemes periodically distribute a part of their earning and invest both in equities and fixed income securities in the proportion indicated in their offer documents. These are ideal for investors looking for a combination of income and moderate growth. These are considered medium-risk schemes.

4.              Equity schemes: The aim of equity funds is to provide capital appreciation over the medium to long term. Such schemes normally invest a majority of their corpus in equities. Growth schemes are ideal for investors who have a long term outlook and are seeking growth over a period of time. These are considered high risk investments.

Q3. What are the benefits of investing in mutual funds?

                There are many benefits of investing in mutual funds including the following:

·          Professional Management

·          Better return than conventional investment avenues

·          Diversification

·          Tax Benefit

·          Liquidity

·          One window operation

·          Regular income stream

The Funds vary with respect to their objectives and types of eligible investments.

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