Mutual Funds
Mutual Funds are an attractive means of saving taxes and diversifying your investment
portfolio. So if you are looking to invest in mutual funds,
Smart Equity
& Commodity Brokers Pvt. Ltd. offers you a host of mutual fund
choices under one roof backed by in-dept information and research to help you invest
smartly.
HOW TO INVEST IN MUTUAL FUNDS?
Smart Equity & Commodity Brokers Pvt Ltd. has made investing in
Mutual funds so simple.
All you have to do is simply pick the phone to contact us or log on to our website
and place your order.
To start investing in NFOs, all you need to do is open an online trading account.
Choose from our wide range of accounts to suit your investment needs.
You can call us and we will have our representative meet you or mail us at
info@smartequity.in
What is a Mutual Fund?
- A Mutual Fund is a trust that pools the savings of a number of investors who share
a common financial goal.
- Anybody with an investible surplus of as little as a few thousand rupees can invest
in Mutual Funds.
- These investors buy units of a particular Mutual Fund scheme that has a defined
investment objective and strategy. The money thus collected is then invested by
the fund manager in different types of securities.
What are the different types of Mutual Funds?
- i.By Structure
- a) Close-Ended Schemes: These schemes have a stipulated maturity period (ranging
from 2 to 15 years).You can invest directly in the scheme at the time of the initial
issue and thereafter you can buy or sell the units of the scheme on the stock exchanges
where they are listed. The market price at the stock exchange could vary from the
scheme's NAV on account of demand and supply situation, unit holders' expectations
and other market factors.
- b) Open-Ended Schemes: These do not have a fixed maturity. You can deal directly
with the Mutual Fund for your investments and redemptions. The key feature is liquidity.
You can conveniently buy and sell your units at net asset value ("NAV") related
prices. ii.By Investment Objective
- c) Income Schemes. Aim to provide regular and steady income to investors. These
schemes generally invest in fixed income securities such as bonds and corporate
debentures. Capital appreciation in such schemes may be limited. Ideal for: Retired
people and others with a need for capital stability and regular income
What are Index Funds?
- Index schemes attempt to replicate the performance of a particular index such as
the BSE Sensex or the NSE 50, or sector index.
- Choice of selection of index.
- The units are tradable on exchanges.
- Can be easily bought and sold.
- Minimum investment limit is one unit.
- Suitable for both long term & short term investors.
- Low cost of investment (no entry /Exit Load).
- Available in Demat form.
What are balanced funds?
- Balance funds invest in both stocks and bonds. Balanced Schemes aim to provide both
growth and income by periodically distributing a part of the income and capital
gains they earn.
- They invest in both shares and fixed income securities in the proportion indicated
in their offer documents.
- In a rising stock market, the NAV of these schemes may not normally keep pace, or
fall equally when the market falls.
- Ideal for: Investors looking for a combination of income and moderate growth
What is a Tax Saving Scheme?
- These schemes offer tax rebates to the investors under tax laws as prescribed from
time to time. This is made possible because the Government offers tax incentives
for investment in specified avenues. For example, Equity Linked Savings Schemes
(ELSS) and Pension Schemes.
- Recent amendments to the Income Tax Act provide further opportunities to investors
to save capital gains by investing in Mutual Funds.
- Ideal For: Investors seeking tax rebates. The details of such tax savings are provided
in the relevant offer documents.
What are Money Market Schemes?
- Money market schemes aim to provide easy liquidity. These schemes generally invest
in safer, short-term instruments, such as treasury bills, certificates of deposit,
Commercial paper and inter- bank call money.
- Preservation of capital and Moderate income.
- Returns on these schemes may fluctuate, depending upon the interest rates prevailing
in the market.
- Ideal for: Corporate and individual investors as a means to park their surplus funds
for short periods or awaiting a more favourable investment.
What are Interval Schemes?
These combine the features of open-ended and close- ended schemes. They may be open
for sale or redemption during pre-determined intervals at NAV related prices.
Do mutual funds offer a periodic investment plan?
Mutual funds have systematic investment plans under which funds can be invested
systematically at selected frequency like monthly, quarterly, half yearly or yearly.
Period of investment and amount of regular investment can also be selected by the
investor
Are investments in mutual funds liquid?
- In open-ended schemes, you can get your money back promptly at net asset value related
prices from the Mutual Fund itself.
- With close-ended schemes, you can sell your units on a stock exchange at the prevailing
market price or avail of the facility of direct repurchase at NAV related prices
which some close-ended.
- INTERVAL SCHEMES offer you sell and buy option periodically.
What are benefits of investment through Mutual Funds?
- Tax free return after 1 year of investment.
- Tax saving scheme under sec.80c of it act.
- Wealth maximisation through systematic investment plan.
- Investment can also be made in the name of minor, corporate, trust etc.
- Better than F.D. / recurring deposit if investment is for long term.
- Premature withdrawal can be made.
- Maximum liquidity available.
- You avail of the services of experienced and skilled professionals (Fund Managers)
who are backed by a dedicated investment research team Which analyses the performance
and prospects of companies And selects suitable investments to achieve the objectives
of the scheme.
What is an Asset Management Company (AMC)?
The experience and expertise of Mutual Fund managers in selecting fundamentally
sound securities and timing their purchases and sales, help them to build a diversified
portfolio that minimises risk and maximises returns. Avail Double indexation benefit.
How are mutual funds regulated?
Well Regulated. All Mutual Funds are registered with SEBI and they function within
the provisions of strict regulations designed to protect the interests of investors.
The operations of Mutual Funds are regularly monitored by SEBI.
Are investments in mutual fund units risk-free or safe?
- Remember, as always, higher the return you seek higher the risk you should be prepared
to take.
- All investments whether in shares, debentures or deposits involve risk. Share value
may go down depending upon the performance of the company, the industry, state of
capital markets and the economy;
- Generally, however, longer the term, lesser the risk;
- Companies may default in payment of interest/ principal on their debentures/bonds/deposits.
- The rate of interest on an investment may fall short of the rate of inflation reducing
the purchasing power.
- While risk cannot be eliminated, skillful management can minimise the risk.
What is Net Asset Value (NAV)? How is NAV calculated?
Market value of assets of scheme minus its liabilities divided by number of units
is per unit NAV. SAY:Net Asset Value/ No. of Units Outstanding on Valuation date
How to choose the right Mutual Fund?
- Identify your investment needs
- Select the ideal mix of Schemes.
- Invest regularly.
- Keep your taxes in mind.
- Start early
- Finally, all you need to do is to get in touch with a Mutual Fund or your agent
/ broker and start investing.
POINTS TO BE CONSIDERED WHILE SELECTING A SCHEME:
- Financial strength of the company.
- Previous earning record.
- Corpus of the fund.
- Flexibility of switching by amc.
- Entry/ exit loading rates.
- Tax rates applicable.
How many funds or stocks should one diversify ones portfolio over?
Keep in mind that any one scheme may not meet all your requirements for all time.
You need to place your money judiciously in different schemes to be able to get
the combination of growth, income and stability that is right for you.
Is it good to buy a fund just before it goes ex-dividend?
Market price of a fund is based on its NAV. After dividend is announced, fund value/NAV
is proportionately reduced. As such there is no extra benefit in buying before it
goes Ex-Dividend. In case one needs to receive tax free income before the close
of financial year they may buy before Ex-Dividend.
Modes of buying Mutual Fund.
- Systematic Investment Plan (SIP) i.Invest a fixed sum every month. (6 months to
10 years- through post-dated cheques or Direct Debit facilities). ii. Fewer units
when the share prices are high, and more units when the share prices are low. Average
cost price tends to fall below the average NAV.
- Systematic Transfer Plan (STP) Invest lump-sum amount in debt oriented fund and
give instructions to transfer a fixed sum, at a fixed interval, to an equity scheme
of the same mutual fund. This will give a good return and face ups and downs of
the market
Systematic Withdrawal Plan (SWP). After investing lump-sum amount one can make provision
for regular withdrawal at a given intervals. This is most suitable for a retired
person to withdraw funds regularly to meet day to day expenses and keep the balance
amount invested with out loss of earning.
What is Entry Load/Front-End Load?
To cover costs for selling, processing an entry load /front- end load is spreading
between 0-2.25% is charged. Amount paid is reduced by this charge and balance amount
is invested in the scheme.
Exit Load/Back- End Load.
- The commission or charge paid when an investor exits from a mutual fund is called
Exit load / Back-end load (0.25-2.25%). NAV is reduced by this amount at the time
of withdrawal of funds.
- Imposed to discourage withdrawals. It may reduce to zero as holding period increases.