Mutual Fund

Navigate Your Finances with Confidence. A mutual fund is a company that pools money from many investors and invests the money in securities such as stocks, bonds, and short-term debt.

BENEFITS OF STARTING EARLY (Comparison Chart)

Description	Child A	Child B
Investment Started (age):	10 Yrs	2 Yrs
Invested Amount:	Rs.10K/month	Rs.5K/month
Years to begin college:	8Yrs	16Yrs
Invested Value when Child turns 18:	16.15 Lakhs	29.07 Lakhs

What Mutual Funds are you Considering?

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thematic

index funds

top rated

better than fd's

higher returns

SIP CALCULATOR

Wish to increase your SIP Investment Amount annually? Calculate your returns with increased amount using our SIP Calculator.

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SIP Period (in years)

• Select the Tabs for SIP or lumpsum investment

• Use the slider to select investment amount

• Select appropriate expected growth return using the slider

• Select investment duration in years using the slider

• Select appropriate growth scenarios to find out Maturity Amount

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Frequently Asked Questions

(FAQs)

A mutual fund is a pool of money managed by a professional Fund Manager. It is a trust that collects money from a number of investors who share a common investment objective and invests the same in equities, bonds, money market instruments and/or other securities. And the income generated from this collective investment is distributed proportionately amongst the investors after deducting applicable expenses and levies, by calculating a scheme’s “Net Asset Value” or NAV. Simply put, the money pooled in by a large number of investors is what makes up a Mutual Fund.

Net Asset Value (NAV) is the market value of the securities held by the mutual fund in a scheme. You would find the performance of a mutual fund scheme denoted by NAV or the Net Asset Value. You can calculate the NAV per unit of the mutual fund by dividing the market value of the securities of the mutual fund scheme by the total number of units of the mutual fund scheme on any specific date.

Here’s the formula to obtain NAV of a fund:

NAV = (Total Assets – Total Liabilities) / Total Number of Outstanding Units

Let's begin my comparing the two so that you can decide which best fits your investment strategy. Returns on Invested Money:

FDs have a guaranteed return whereas in mutual funds there is no guarantee on the returns on investments as it is subject to market volatility. Although, in the long run, Mutual Funds earn much higher returns than FD.

All mutual funds are subject to short term and long term capital gains tax. STCG is charged at a flat rate of 15% whereas LTCG is charged at 10% of the earnings above ₹1 lakh. In case of debt funds, LTCG is 20% post indexation. FDs are subject to 10% TDS on interest earned above ₹10,000 over a financial year.

The risk involved in a mutual fund varies from fund to fund, it is mostly influenced by the market. FDs carry zero risk as the depositor will receive guaranteed returns at a fixed interest rate.

Traditionally, Indians have chosen investments that guarantee the safety of the capital and offer fixed returns. This is a significant reason behind fixed deposits (FD) and recurring deposits (RD) gaining popularity in the country. Mutual funds have also suffered because many people believe they could lose money as returns are not guaranteed. Moreover, they come with a warning stating mutual funds are subject to market risk.

While no investment is 100% risk-free, however, you need to know the following before investing:

No one will run away with your money

If you are worried that mutual funds are a type of flight-by-night scheme, then be rest assured that mutual funds are completely safe. You will not wake up one morning to find out that the mutual fund you have invested with has vanished along with your money.

Mutual fund companies are regulated and supervised by regulatory agencies such as the Securities and Exchange Board of India (SEBI) and the Association of Mutual Funds in India (AMFI), no fund-house can abscond with the investor’s money.

Mutual Funds are meant for earning higher, tax-efficient returns

Mutual funds don’t guarantee capital protection or fixed returns. However, this is a good thing as mutual funds would be a poor investment product if they did. You should choose the right mutual fund, which is in sync with your investment goals and invest with a long-term horizon.

An investment in an open end scheme can be redeemed at any time. Unless it is an investment in an Equity Linked Savings Scheme (ELSS), wherein there is a lock-in of 3 years from date of investment, there are no restrictions on investment redemption.

Investors need to keep in mind any applicable exit load on their investment. Exit loads are charges deducted at the time of redemption, only if redeemed before a specified lock-in. AMCs usually impose an exit load to deter short term or speculative investors from entering a scheme.

Need for Monitoring the Market

SIP :

SIPs, you have the chance to enter during different market cycles. Investors do not have to watch market movements as closely as they would for lump-sum investments.

LUMPSUM :

Lump-sum investments are a bulk commitment, investors need to know when they are entering the market. Lump-sum investments are most beneficial when you invest during a market low.

Flexibility

SIP :

SIPs are a more flexible investment method compared to the lumpsum option.

LUMPSUM :

Lumpsum investments lack flexibility.

Response to Market Volatility

SIP :

SIPs are not very reactive to market volatility.

LUMPSUM :

Lumpsum investments are highly responsive.

Inculcation of Financial Discipline

SIP :

This investment option can inculcate financial discipline in investors as they get into the habit of investing in a planned manner.

LUMPSUM :

It does not inculcate such discipline as the investment is made at one go.

Rupee-Cost Averaging: A SIP helps spread over time during both rising and falling markets. Whereas with a lump sum investment, your money would buy fewer units of the mutual fund when markets are up and more units when they are down. Thus, a SIP enables you to lower the average cost of your investment and reduce the risk of your investment. This is known as rupee-cost averaging.

Power of Compounding: A SIP enables you to regularly increase your investment amount by a fixed amount and get the benefit of compounding as you earn returns on the returns generated by your investment. This is known as power of compounding.

Less Stressful: A SIP investment is less stressful than a lump sum investment and may help you stay invested. Markets can be highly volatile and can induce you to withdraw your money in a panic, if you have made a lump sum investment. This effect is less intense when you make an investment via a SIP because your money is spread out over time.

These are tax-efficient investment instruments. For different mutual funds, the taxation is also separate.

Under ELSS, a tax benefit upto Rs. 1.5 L is available under Section 80(C). Under this there is a lock-in period of 3 years.

Non-tax saving equity funds:
Under long term capital gain, tax on redemption is exempted upto Rs. 1 L with 10% infection over that. Short term capital gains on debt funds, balanced funds and SIPs are taxed at 15%.
Debt Funds:
In case of debt funds, LTCG is 20% post indexation.

The mutual funds that have significantly higher volatile but offer high returns with a greater risk of loss are called high risk mutual funds. Large cap equity are less risky and give stable returns. Mid cap and small-cap companies have small capitalization and have scope for growth give high returns but have significantly high risk.

Selecting the right mutual fund as per your investment strategy and goal can be overwhelming. Here are some high level criteria to make your choice easier.

Make a Strategy:
Think about your financial situation, goals, timeline and risk tolerance before you select your investment. With the help of these answers, you will be able to make a choice based on size of company, style, credit quality etc. With this you can make a balance in your portfolio.

Monitor Performance of the Company:
The performance of the scheme you are interested in should be monitored at all times periodically. Past performance alone cannot guarantee future performance. But studying it over the long term may help you narrow down your choices.

Think about the costs:
You must look at the expense ratio of the funds you want to invest in as the costs are an important consideration. Your costs may include the management fee, distribution fee, transaction fee and other expenses. Fees differ from fund to fund, so a look into it for comparison sake would be beneficial.

Other Considerations:
While the three above are important considerations, a closer look is always a good idea. Consider the manager you want to work with, the capabilities of the company that manages the fund, the track history of the companies selling equity, etc.

SIPs have been regarded as the best way to invest in Mutual Funds. You not only learn to save regularly but also to invest in a disciplined manner. However, while treading on your investment path, you may come across market swings every now and then. But this should not scare you to exit the fund or stop you from investing. Like every smart investor, you should remain goal-oriented and stick to your investment horizon. Your chances of wealth accumulation would be higher when you would stay committed to your SIPs.

No, you cannot change your SIP amount anytime.

There is no maximum tenure. You can invest as long as you want to with SIPs. However, the minimum tenure is 3 years.

Different types of SIPs are available in the market like –

Step-up or top-up SIP: This allows you to increase the investment amount automatically at specified intervals at a particular amount or percentage.
Perpetual SIP: It allows you to keep investing for as long as you wish to without any end date.
Trigger SIP: It lets you start investing during a specific index level, NAV, date, or event.
Flexible SIP: It lets you change your investment amount as per your preference