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Mutual Funds can meet the investment objectives of almost all types of investors. Younger investors who are willing to take some risk while aiming for substantial growth of capital in the long-term will find equity schemes (i.e. funds which invest in stocks) an ideal option.
Older investors who are risk-averse and prefer a steady income in the medium-term can invest in income schemes (i.e. funds which invest in debt instruments). Middle-age investors can allocate their savings between income funds and equity funds and achieve both income and capital growth. Investors who want to benefit from regular savings can put aside a small sum every month in a Systematic Investment Plan.
Net Asset Value is the market value of the assets of a 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.
Purchase Price is the price an investor pays when investing in a scheme. It is also called as the Offer Price.
It is the price at which Open-Ended schemes repurchase their units and Close-Ended schemes redeem their units on maturity. Such prices are NAV related.
Exit Load is a charge collected by a scheme when it buys back the units from unit-holders. It is also called as Repurchase Load & Exit load is applicable for a specific period from the time of purchase (as specified from time to time), and beyond this period, no exit load is applicable on redemption.
Application forms are usually available at all Mutual Fund branch locations and at the Registrar Branch locations where the Mutual Fund operates. On request, the application could be sent by e-mail to the customer or by courier. Application forms are also available online — under the downloads section on the website. The customer has to take a print of the application form, fill in the details and submit it at the nearest Investor Service Centre.
Cut-off timing is the time before when an investor must submit / lodge his / her application form for the date of submission / lodgement to be considered as the transaction date. For applications submitted / lodged after the cut-off time the applicable transaction date is the next business day. Depending on the transaction date the NAV is applicable.
The Scheme Information Document contains the details of the scheme that the AMC or sponsor prepares for and circulates to the prospective investors, inviting subscription to the units of the Scheme(s).
The Statement of Additional Information contains details of Principal Mutual Fund including its constitution, certain tax, legal and general information and legally forms a part of the Scheme Information Document.
The Current Value of Investment is the Market Value of the Investment based on that day’s NAV of the Investment in which the Scheme is invested Scheme – Plan of a Mutual Fund.
On all business days, depending on the scheme type, NAV is declared in the evening at or before 9 pm.
Systematic Investment Plan (SIP) is a simple, time-honored strategy designed to help investors accumulate wealth in a disciplined manner over the long-term and plan a better future. This disciplined approach to investing also provides following benefits:
Power of Compounding
Rupee Cost Averaging
A SIP or systematic investment plan is where you ask the mutual fund to deduct a certain amount from your bank on say the 5th or 15th or 25th of each month. You will be allotted units in your folio as per the NAV on the purchase date. In a lump sum investment, you buy units on any given day.There is no difference between a SIP and lump sum investment.
From an investing perspective, there are three types of mutual funds
Equity mutual fund: A fund that invests at least 65% of its portfolio in Indian stocks.
Debt mutual fund or fixed income mutual fund: A fund that invests predominantly in bonds (a tradeable fixed deposit)
Gold mutual fund: A fund that tracks the price of gold
Hybrid mutual fund: A fund that invests in a little bit of equity, a little bit of time bonds, a little bit of gold. That little bit can be constant or vary from time to
There are equity funds knowns as Equity Linked Saving Schemes (ELSS). Your investments up to Rs. 1.5 lakh a financial year will be exempt from tax (section 80C). Each unit you purchase will be locked up for 3 years though.
So that is the first set of questions and my stupid answers. To be continued. I am sure many of you do not agree with some of my suggestions, but I think it is better for a newbie to start slowly instead of opening a SIP from day one.