Frequently Asked Questions
General Questions
Asset Management Company (AMC) is a company that is responsible for managing mutual funds.
AMC is a professional money manager and has mutual fund schemes with different investment objectives. They hire professional fund managers who are responsible for buying and selling securities (debt + equity) in sync with the investment objective of the fund.
Based on the mutual fund’s investment objective, a mutual fund invests the money collected from the investors in different securities comprising equities, debts, money market instruments, etc. A mutual fund charges a nominal fee and invests the entire amount.
In proportion of the amount invested and Net Asset Value (NAV), units of mutual fund scheme are allocated to the investor. Capital appreciation & income earned is shared between investors in proportion to their unit holdings.
In mutual fund investments, investor funds are collected and pooled together to form a common investible fund. All the investors have same profit and loss. Investors cannot see individual investments made by fund managers.
Whereas in Portfolio management schemes (PMS) investors individual investment can be identified and each investor has a separate profit and loss.
In FDs, the bank gives investors a guaranteed fixed rate of interest for the period you specify, for example like 6% for 1 year. After one year you get the principal amount plus interest.
Returns on FDs are taxed as per the income bracket of the individual.
Where as in mutual funds, money is invested as per the scheme’s investment objective. The profit/ loss are variable and the same is distributed to investors based on the proportion of their unit holdings.
Mutual funds are taxed based on the asset class the funds are invested in.
Apart from investing in equities, mutual funds invest in a number of debt instruments such as bonds, debentures, commercial paper and government securities. In fact, mutual funds also invest in other mutual funds or metals like gold etc.
All mutual funds are regulated by Securities and Exchange Board of India (SEBI) and in case the AMC is promoted by a bank, then RBI.
Apart from this, the board of directors of an AMC also takes care of the interests of the investors.
1. Diversification: - Investors can spread out and minimize their risk up to a certain extent by purchasing units in a mutual fund instead of buying individual stocks or bonds. By investing in a large number of assets, the shortcomings of any particular investment are minimized by gains in others.
2. Economies of scale: - Mutual funds buy and sell large amounts of securities at a time, this helps reduce transaction costs and brings down the average cost of the unit for investors.
3. Professional management: - Mutual funds are managed by thorough professionals. Most investors either don’t have the time or the expertise to manage their own portfolio. Hence, mutual funds are a relatively less expensive way to invest and monitor their investments.
4. Liquidity: Investors always have the choice to easily liquidate their holdings as and when they want.
5. Simplicity: Investing in a mutual fund is considered to be easier as compared to other available instruments in the market. The minimum investment is also extremely small, where a SIP can be initiated at just Rs.500 per month basis.
Never put all your eggs in a single basket.
You should always look to minimize your risk by distributing your investments among various financial instruments, asset classes, industries and other categories. The intent is to maximize the return on investment by being invested in different areas which are unrelated to each other. This also gives you a buffer to reduce the impact of market downturns.
A portfolio of a mutual fund scheme is the list of securities and cash it holds at the moment. A diversified portfolio of different securities and asset classes helps reduce the overall risk.
NAV is the price per unit of a mutual fund. Just like shares have a share price, mutual funds have a NAV.
When you purchase a unit of a mutual fund, the purchasing price is the NAV. Unlike share price which changes in real time, the NAV is updated at the end of each trading day. Due to this, the investor never knows the exact NAV at the time of buying and selling.
The NAV is calculated as net assets minus net liabilities (expenses) of the mutual fund scheme on a given day & dividing it by the number of outstanding units.
Yes , you can visit https://ezeehouse.com/ and register . We would love to assist you in anyways possible.
It is not possible to break the locking for 3 years in ELSS funds but you can opt for an dividend option in ELSS funds to get your profits out in of form dividends. So if dividends are declared before 3 years by the mutual fund you can get your funds before 3 years. But there is no guarantee or fixed pattern for dividend declaration.
You can also sell close ended funds in the secondary market but this is difficult. Firstly you have to go through a broker and you would have to sell your funds at a discount to the price they are traded at.
BEST MUTUAL FUNDS FOR TAX EXEMPTION 2018
At EzeeHouse we have handpicked the best mutual funds for tax exemption 2018 to save you taxes up to Rs 1.5 lakh under Section 80C.
Based on research by our experts, we recommend the following best tax saving mutual funds (ELSS funds) to invest online
Best Mutual Funds for Tax Exemption 2018
- Principal Tax Savings
- ABSL Tax Relief 96 (G)
- DSP BR Tax Saver Fund
- Kotak Tax Saver – Regular (G)
There is no minimum term to invest for SIP.
But if you really wish to see some significant change in your investment then invest for long time.
There are 2 ways of investing money in SBI fund .
- Visit the website of SBI mutual fund , then register and invest .
- Through the companies like Ezeehouse , Scripbox etc . Visit there site and through a simple procedure you can invest and track your mutual funds .
These are few blogs and sites where you can get detailed information about mutual funds .
Best mutual funds to invest online | Best mutual funds to invest online
Ezeehouse answers how to invest in mutual funds
Finance Blog | Scripbox.com
Mutual Fund FAQs.
It is the most regulated industry .All mutual funds are regulated by Securities and Exchange Board of India (SEBI) and in case the AMC is promoted by a bank, then RBI.
Apart from this, the board of directors of an AMC also takes care of the interests of the investors.
For more details about Mutual funds,click on the link below.
Ezeehouse answers how to invest in mutual funds
In the growth option the profit made by scheme will be invested back into the same. So in this case the scheme gains when NAV rises and loses when NAV goes down.
You can get profit only when you sell or redeem your investment.
Yes , you can do it .
Markets are currently very volatile due US-China trade wars and spike in interest rates. Due to this you would see great volatility in small and mid caps stocks.
I would suggest that you should try and mitigate your risk by investing through
- A STP or SIP route
- Don’t put all your funds in small and mid caps like you can put 25 percent of your portfolio in small and mid caps and gradually move it 40% to 50% after you see a fall in volatility.
Yes you can start a SIP if have done a lumpsum investment in the same scheme.
Starting a SIP is good investment idea.
But we would suggest you diversify (don't put all your eggs in one basket) your investments into different funds houses and different types of funds to get the highest risk adjusted returns.
You can visit our investment app ezeehouse to get a good diversified portfolio or Visit — https://www.ezeehouse.com
How to start investing in mutual funds online.
Mutual funds are optimal investment drive for those common investors who are unaware of how to invest in mutual funds online. It is one of the simplest form to widen their venture.
Common investors can appoint mutual fund expert. We at Ezeehouse Services have short listed the best mutual funds in india & recommend investors about best mutual fund to buy. If you are investing through us, Sign-up with us, Complete your KYC and you are good to go.
WHAT ARE MUTUAL FUNDS ?
A mutual fund is a professionally managed trust that pools funds of many investors and invests them in stocks, bonds, short-term money market instruments and commodities such as precious metals etc. Each mutual fund has a common financial goal and invests funds in different asset classes based on this investment objective.
Mutual funds are professionally managed and well diversified to offset potential losses. They offer an attractive way for savings with low fees or requiring constant attention from individual investors. Mutual funds investments are for investors who lack time or knowledge to make difficult investment decisions. In a mutual fund, the portfolio manager makes these essential decisions for you.
Start your mutual funds investments online by downloading the
Ezeehouse App from Google Play Store
4 REASONS TO BUY MUTUAL FUNDS ONLINE AND SAY “MUTUAL FUNDS SAHI HAI”
Does the word “investments” scare you and raise a number of questions like where should you invest your money – should you buy mutual funds online, invest in real estate, invest in stocks, etc? How much amount should you invest, are your investment safe, will you get the desired returns on your investment etc.?
Besides this you would have heard and believed in a lot of myths and misconceptions that have also clouded your judgement.
But remember mutual funds are the solution to all your investment problems.
Mutual funds are a safe and simple way to put your money to work. You have to choose the mutual funds based on your requirements. Invest in the best mutual funds online or through paperwork and you are good to go.
Now let’s look at the top 4 reasons why you should buy mutual funds online?
- . No lock in-period, withdraw your funds anytime
- Balance between risk and returns.
- You can invest for short-term or long-term goals
- Buy mutual funds online with an amount as low as Rs 500!
When you buy open ended mutual funds online or physically, you have the freedom to withdraw your money anytime you like. Your mutual funds will grow till the time you are invested in the markets. Mutual fund withdrawals are extremely flexible, giving you options to fully or partially redeem your investments.
Mutual funds are managed by professional fund managers and are invested in a number of stocks. They help you reduce the risk associated with investing in equities and at the same time get the best returns possible.
Whether you have short term or long term goals, with mutual funds you can invest in a scheme which is in sync with your financial goals and accordingly make good returns on your investment, for example you can make an emergency fund or plan for your child’s wedding. Option for both short and long term investing are available.
Mutual funds are not reserved for just big investors. You can start investing through SIP in mutual funds with only Rs 500. Gradually you can increase your investments based on your financial situation. Mutual funds help to build a large corpus over a long term period by helping you start early and investing regularly.
What is the difference between mutual funds and portfolio management schemes?
In mutual fund investments, investor funds are collected and pooled together to form a common investible fund. All the investors have same profit and loss. Investors cannot see individual investments made by fund managers.
Whereas in Portfolio management schemes (PMS) investors individual investment can be identified and each investor has a separate profit and loss.
Another major difference in mutual fund and PMS is investment amount. In PMS you must have minimum 25 lakhs to invest but in mutual funds you can start with minimum 500 rupees.
Basics of Mutual Funds
A mutual fund is a professionally managed trust that pools funds of many investors and invests them in stocks, bonds, short-term money market instruments and commodities such as precious metals etc. Each mutual fund has a common financial goal and invests funds in different asset classes based on this investment objective.
Mutual funds are professionally managed and well diversified to offset potential losses. They offer an attractive way for savings with low fees or requiring constant attention from individual investors. Mutual funds investments are for investors who lack time or knowledge to make difficult investment decisions. In a mutual fund, the portfolio manager makes these essential decisions for you.
Mutual fund is set up as a trust which has trustees, sponsors and Asset Management Company (AMC) & custodian. A sponsor makes a trust and acts like promoter of a company and the said trust is registered with the Securities and Exchange Board of India (SEBI) as a Mutual Fund. The trustees hold its properties on behalf of the unit holders. AMC registered with SEBI manages the fund and makes investment decisions based on the objective of the fund.
The trustees have superintendence power and direction over the AMC. They also track mutual fund performance and compliance of SEBI regulations.
Mutual funds collect and invest the funds of pool of investors in securities like stocks, bonds, commodities etc. Mutual funds are professionally managed by a team who understands the market and make strategic investments based on the investment objective.
Investors are given units of the mutual funds based on the price and funds they have invested. The Asset Management Company is responsible for managing the investments, advisory services, financial consulting, customer service, accounting, marketing and sales functions for the schemes of the mutual fund.
Professional Management
Mutual fund investments give investors access to professional management for their funds. Professional management has many advantages like a clear investment objective, investment based research and prudent investment processes etc
Affordable Portfolio Diversification
Diversification helps reduce the risk of a portfolio and hence gives better risk adjusted returns. With even small investments say - of Rs 500, gives investors ownership of a portion of a diversified investment portfolio.
Economies of Scale
Investor’s together results in large sums of money which in turn gets investors access to professional managers to manage their funds which individual investors cannot do. Along with the higher transaction volume mutual fund investors get to negotiate better terms with brokers, bankers and other service providers. This is a distinct economic advantage to an investor in terms of cost saving.
Liquidity
Investments like real estate, venture capital, PPF where the investor cannot easily sell his investment in the market or get immediate access to funds as per their needs, are technically called illiquid investments and may result in losses for the investor.
Depending on the type of mutual fund, they can be liquidated, either at any time, or during specific intervals, or at times only on the closure of the scheme.
Tax Deferral
Mutual fund investors can let their investment grow in a scheme for several years and with this, they can defer their tax liability. This helps investors to legally build wealth faster than would have been the case, if you were to pay tax on the income each year.
Tax benefits
Tax saving mutual funds (ELSS) give the benefit of deduction of the amount subscribed (up to Rs. 150,000), from the income that is liable to tax.
Dividend received from mutual fund schemes is tax-free in the hands of investors. However, dividends from certain categories of schemes are subject to dividend distribution tax, which is paid by the scheme before the dividend is distributed to the investors.
Long term capital gains is 10% and short term capital gain is 15% and gives mutual funds a definite advantage over other asset classes like real estate, debt etc.
Investment Comfort
Investment in mutual funds can be made very easily and additional purchases need minimal paperwork. In today’s world mutual fund investments can be made completely online.
Regulatory Comfort
Mutual funds are regulated by Securities & Exchange Board of India (SEBI). SEBI has mandated strict checks and balances in the structure of mutual funds and their activities.
Systematic Approach to Investments
Mutual funds let investor invest regularly with a Systematic Investment Plan (SIP); or withdraw regularly with a Systematic Withdrawal Plan (SWP); or move money between two schemes with a Systematic Transfer Plan (STP). These approaches promote investment discipline and are extremely useful in long-term wealth creation and protection.
Mutual funds can be classified based on when they are open for subscription or redemption and based on investment objectives
Based on Subscription and Redemption
a) Open-ended Mutual Funds.
Mutual funds which can be purchased and redeemed at all times are called open ended mutual fund. Investors can buy and sell units of these mutual funds at the NAV price, hence are very liquid.
b) Close-ended Mutual Funds
Mutual funds that can be bought for a specified period at the time of initial launch are called close ended mutual funds. These funds are listed on a recognized stock exchange and are sold on the secondary market and hence are not very liquid.
c) Interval Funds
Interval funds combine the features of open and close-ended funds. They trade on stock exchanges and can be sold at predetermined intervals on the prevailing NAV.
Based on Investment Objectives
a) Equity Funds
Equity funds invest primarily in stocks with the investment objective of long-term capital growth. Minimum 65% of its funds should be in equity and equity related securities. The mutual fund investments can be across a wide range of industries or focus on one or more industry sectors or based on market cap. Investors with a long-term outlook and higher risk appetite look for equity funds.
b) Debt/Income Funds
Debt / Income funds invest in securities such as bonds, corporate debentures, government securities (gilts) and money market instruments. At least 65% of its corpus has to be in fixed income securities. They provide low risk and stable income to investors with capital preservation. These mutual funds are less volatile and produce regular income. They are suitable for investors who are looking for capital safety and moderate growth.
c) Balanced Funds
Balanced funds invest in both equities and fixed income instruments in line with the pre-determined investment objective of the scheme. These funds provide both stability of returns and capital appreciation.
Liquid Funds
Liquid funds invest in instruments with very little risk like FDs such as Treasury Bills, Certificates of Deposit and Commercial Paper for a period of less than 91 days. These are ideally suited for investors looking to park their funds for short durations with minimal risk.
Gilt Funds
Gilt funds invest exclusively in government securities and only have interest rate risk. They have no or very little credit risk as they are backed by government.
Different types of Mutual Funds & what they typically invest in:
| Type of Fund | Typical Investment |
|---|---|
| Equity or Growth Fund | Equities like stocks |
| Fixed Income Fund | Fixed income securities like government and corporate bonds |
| Money Market Fund | Short-term fixed income securities like treasury bills |
| Balanced Fund | A mix of equities and fixed income securities |
| Sector-Specific Fund | Sectors like IT, Pharma, Auto etc. |
| Index Fund | Equities or Fixed income securities chosen to replicate a specific Index for example S&P CNX Nifty |
| Fund of funds | Other mutual funds |
KYC Questions
Know your customer ('KYC') is the process mandated to ensure that customer of a financial services firm is real and his identity details, address, contact details and demographic information like age and place of birth is verified and collected as per standard format prescribed by SEBI Guidelines.
SEBI (Securities and Exchange Board of India) is the regulator for all investment activities in securities in India.
When you make a mutual fund investment, or open an investment account, the financial service providing firm which is a SEBI registered intermediary has to ensure that your KYC information is collected, verified and updated.
The Information is collected and stored in a standardized format. Once collected, your information is stored with national KRA (KYC Registration Agency). Once the information is stored with a KRA, you do not need to resubmit whenever you invest next time.
If your KYC status is registered, it means your information is stored and available with KRA and there is no need for you to submit your details again. However, if your KYC status is under process, on hold, incomplete, rejected, old or not available etc. you will have to again complete a fresh KYC process.
You can check your KYC status with the KRA website like NDML website (one of the largest KRA in India). By entering your PAN card number, you will know if you are registered and the date of last modification.
You need to submit a fresh application along with a self-attested photo. You also need to submit a copy for identity proof such as:-
a). Passport
b).Driving licence
c).Voters' identity card
d).PAN card
e). Aadhaar Card issued by UIDAI and NREGA Card for address proof
f).Latest bank statement
g).Voter identity card
h).Ration Card
i).Registered lease/sale agreement of residence
j).Latest landline telephone bill
k).Latest electricity bill
l).Gas bill
m).Aadhaar
It helps financial firms identify if the clients and their details are real and helps to prevent and catch instances of fraud and siphoning of funds.