FAQs
Dividends are paid out of the distributable surplus of the funds. They are bifurcated into dividend payout and dividend reinvest. In dividend payout, the dividends declared are actually paid out to the investors. Under dividend reinvest, the dividend declared is used to buy additional units to the investors.
Scheme should be selected as per Risk appetite of the Investor. Few factors to consider are: • Types of Fund • Size of the Fund • Diversification of the Fund • Requirement of Investment • Security of Fund
Risks appear in many forms. For example, if you own a share of a company, there is a Price Risk or a Market Risk or a Company Specific Risk. The share of just that company may dip or even crash due to any of the above reasons or even a combination of these reasons. As a mutual fund is a portfolio of 50-60 stocks or more, this diversifies the risk.
Investments made under the growth option will not yield any short term income, in the sense that all money invested will continue to be invested until redeemed. This type of investment is more suited for long term investing in equity mutual funds, as there are no taxes on long term capital gains.
NAV is declared on every business day of the year.
Net Asset Value is the market value of the assets of the scheme minus its liabilities. The per unit NAV is the net asset value of the scheme divided by the number of units outstanding on the Valuation Date. For example: Total Value of Securities (Equity, Bonds, Debentures etc.) - INR 1,000 Cash - INR 1,500 Liabilities - INR 500 Total outstanding units - 100 NAV [(1000+1500-500)/100] - INR20 per unit
KYC is an acronym for "Know Your Customer" and is a term used for Customer Identification Process as a part of Account Opening process with any financial entity. KYC establishes an investor’s identity; address through relevant supporting documents such as prescribed photo id (e.g., PAN card, Aadhar card), address proof and In-Person Verification (IPV). As per regulatory requirements KYC is mandatory to invest in Mutual Funds.
KRA stands for KYC [Know Your Customer] Registration Agency. It is registered with SEBI. The KRA maintains KYC records of the investors, centrally, on behalf of capital market intermediaries registered with SEBI.
You may verify KYC status by visiting the website of the KRA. You will have to enter your PAN details to check the status of KYC. There are multiple KRA in India and one of them is CVL. CDSL Ventures Ltd. (CVL) - https://www.cvlkra.com/
There are many types of mutual funds available to invest. Some of the famous mutual fund types are: Equity Mutual Funds These funds have portfolios focused primarily on stocks of different companies. Investment in Equities holds a fair amount of risk and the same is subsequently reflected in the equity mutual funds. Given that, the Equity based mutual funds have an excellent performance history in terms of returns in the long run. Debt Mutual Funds These funds have investments mainly focused on fixed income instruments such as corporate and government bonds, money markets, etc. They bear less risk but that comes at the cost of average returns. Debt funds are suitable for conservative investors who generally have a low risk appetite. The returns in debt mutual funds are relatively more stable than equity mutual funds. Hybrid Mutual Funds Hybrid Mutual funds are a combination of equity and debt mutual funds which invest in a diversified portfolio of both equity and debt securities. People who have a moderate risk appetite and are looking for a diversified portfolio should invest in hybrid funds rather than several individual securities. Liquid Mutual Funds Liquid funds are debt funds that lend to companies for a period of up to 91 days. These are the safest funds amongst all the mutual fund categories, owing to their extremely low lending duration.No lock-in, no entry/exit loads, near zero risk and easy one day withdrawal. Thematic Mutual Funds Thematic funds are equity mutual funds that invest in stocks tied to a theme. These funds are more broad-based than sectoral funds, as they pick companies and sectors united by an idea. For instance, an infrastructure theme fund will invest in cement, power, steel, among other sectors
Absolute Returns is the most straightforward method to calculate how much gain or loss you’ve made on your investment. Absolute Return (%) = (EndingValue - BeginningValue) / BeginningValue CAGR (compounded annual growth) of your mutual fund investments shows the fund’s average annual growth or decline over a specific period of time. XIRR (Extended Internal Rate of Return) calculates the CAGR of each installment. CAGR is good for lumpsum investments, but where there are different cash investments & withdrawals like in SIPs or SWPs, CAGR is not the right measure. Hence, XIRR calculates the CAGR for each installment and is then added together to give you the overall Compounded Annual Growth Rate.
There are a few fees/charges associated with the mutual fund investment. Expense Ratio: It is an annual fee charged by the asset management company from the investors. The expense ratio is levied to cover up the costs incurred in the proper management of the investors fund which include fund managers salaries, the cost of advertising the fund scheme, general expenses incurred by the fund house, etc. Exit Load: Exit load is charged when the investor redeems the purchased mutual fund units, i.e; exiting from the fund. Exit load is charged by the fund house only when the investor makes an early exit from the fund. LTCG / STCG will also get charged if applicable at the time of tax filing.
