Mutual Funds

1. What is the best mutual fund scheme to invest in?

Mutual Funds should be chosen according to financial goals and investment horizon.

2. How to invest in mutual funds?

Investing in mutual funds is a simple process. The various ways through which you can invest in mutual funds include:
• Direct investment by approaching the sales office of the fund house
• Investment through authorized agents and distributors
• Online investment through the website of the fund house or through distributor websites
• Investment through the stock exchange

3. What do I get as proof of my holdings?

You get an “account statement” which is similar to a bank passbook. The account statement is a non-transferable document which shows details of all purchases and sales, along with the price at which the purchase or sale was made. It will also show the, amount invested and redeemed to date and the number of units held, helping you track your investments.

4. How do i switch between schemes of different fund houses?

Unitholders cannot switch between schemes of different fund houses. The unit holder will need to redeem from one fund house and after credit of funds into the bank account, will have to invest in the other fund house scheme.

5. Can an investor invest in MF without KYC?

No. With effect from January 1, 2011 KYC is mandatory for all classes of investors irrespective of investment amount.

6. Does the investor need to submit PAN copy each time he invests in MF?

An existing investor whose PAN is already updated in the mutual fund folio and wishes to invest again need not submit the PAN copy again.

7. Can an investor give a purchase application along with KYC?

No. As per latest guidelines, you need to first submit the KYC form and documents and become KYC compliant. Only then can you submit purchase application. 

8. Does a Joint Holder need to be KYC compliant while investing in MF?

Yes. All the Joint Holders need to be mandatorily KYC Compliant.

9. Does a Guardian acting on behalf of the minor need to be KYC compliant in MF?

Yes. The guardian of the minor investor need to be mandatorily KYC Compliant.

10. Does a Nominee need to be KYC compliant?

No. Nominee need not be KYC Compliant at the time of subscription of units. However, if the nominee wishes to claim the units on the death of the sole holder or all the surviving holders then he needs to submit KYC application form and get his KYC done.

11. How would long term capital gains on SIP be calculated? 

Units are redeemed on a first-In-first-out (FIFO) basis, i.e., the earliest units purchased would be considered for computing the capital gains and classifying gains as short term/long term.

For equity-oriented funds, capital gains for a holding period of more than one year are termed as long-term capital gains (LTCG). LTCG on equity funds would be calculated at 10% for gains exceeding Rs 1 lakh in a financial year.

For debt funds, long term capital gains are taxed at 20% (excluding cess) post indexation.

12. If an NRI invests in Indian mutual funds online, can they get 

TDS deducted back if their income in India is less than the 

minimum tax slab of Rs 2.5 lakh?

NRI investments in mutual funds are subject to TDS deduction, hence cannot claim TDS back. They may avoid double taxation on income by claiming tax relief in India has signed the Double Taxation Avoidance Treaty (DTAA) with the country of your residence. It is better to consult a tax advisor for specific tax advice. 

13. Would capital gains tax be applicable on switches also?

Yes, in a switch the units are redeemed from one scheme and invested into another scheme. Hence even though amount does not get credited to bank account, for taxation purposes it would be considered as sale from one scheme and investment into another scheme. Hence LTCG or STCG would be applicable as per situation.

14. Are dividends received from mutual funds taxable ?

Dividends are taxed as per income tax slab under the head income from other sources.

15. Can I change my option in mutual funds from growth to dividend an vice versa?

Yes, you can switch from growth option to dividend option in mutual funds. But when you switch from growth to dividend option or vice versa, it is treated as an exit or redemption from growth option of a scheme and purchase into the dividend option of the scheme or vice versa. Exit loads would be applicable accordingly. 

16. What is the difference between direct plan and regular plan in mutual funds?

A Direct Plan is where you buy a mutual fund directly from the fund house or the AMC without the involvement of an agent or intermediary in the process of investing. 

A regular Plan is where you invest in a mutual fund scheme with the help of an intermediary. 

The only major difference between the two plans is that in a regular plan, you will have to incur higher expenses. Hence the returns earned on direct plans are eventually higher than the ones earned in regular plans. 

17. Can I switch from direct to regular plan of a mutual fund and vice versa?

Yes, you can switch from regular plan to direct plan and direct plan to regular plan. This will be treated like a regular switch transaction wherein you exit or redeem from one scheme and purchase units into another scheme. 

18. How can the investor convert the units in the Physical form into dematerialized mode & vice versa?

In case the investor wishes to convert the units from the Physical mode into dematerialized mode & vice versa, then he needs to approach his Depository Participant and submit a request with his DP.

19. Where can the investor submit the change of bank/address details if he has the units held in the dematerialized mode?

If the investor has the units held in the dematerialized mode and wishes to change of bank/address details then he needs to approach his Depository Participant and submit a request with his DP.

20. Can an investor request to convert the units into the DEMAT mode if there is an existing SIP in the folio?

No.

21. Can I use my existing demat account to convert my mutual fund units to demat form?

Yes,

22. How can I obtain the NAV details of my mutual fund units held in demat form?

The NAV details can be obtained from the concerned AMC / Registrar. You can also view the NAV details of your Mutual Fund Units held in dematerialised form through IDeAS facility which facilitates you to view the latest balances with value and transactions that have taken place in your demat account in the last 30 days.

23. Can I do an SIP in my mutual fund units held in demat form?

Yes, you can start an SIP in mutual funds held in demat mode. 

24. Can I do STP or SWP of mutual fund units in demat mode?

No, you can not do STP or SWP in demat mode. Only SIP can be done. 

25. Can I transfer the mutual fund holdings from one demat account to another?

Yes. You can transfer Mutual Fund Units from one demat account to another demat account (i.e., transfer between DPs of NSDL) or from demat account of one depository to demat account of another depository except for Mutual Fund Units which are under locked-in (say ELSS units).

26. What is the procedure to convert my units from demat mode to physical mode?

You are requested to check with your Depository Participants (DPs) for the Rematerialization Request Form to convert mutual funds units held in demat mode to physical form.

27. Can I transfer only partial or fractional units of my schemes from demat to physical and vice versa?

No. 

28. What are ETF’s?

ETF’s or Exchange Traded Funds can be bought and sold like stocks on a regular basis.  When a person invests in ETF’s, they are investing in the set of underlying securities, which represent a particular index. ETF’s also has a net asset value or NAV that is determined at the end of each day. 

29. Can I redeem fractional units from ETF?

No, you can not redeem fractional units in ETF.

30. Can I do an SIP in ETF?

No, SIP can not be done in ETF’s. 

31. Can I change my distributor in my mutual fund holdings?

Yes, you can change your distributor by giving a request to the respective AMC for the same. It will take 7-10 working days for the change to effect the change.

32. What is MF Central?

MF Utility (MFU) https://www.mfuindia.com/is an innovative initiative of the Mutual Fund Industry which offers convenience and empowers the investors of Mutual Fund schemes. MFU facilitates the investors with a Common Account Number (CAN) which enables them to transact in multiple schemes of various Mutual Funds participating in MFU through a single transaction and consolidated payment. 

33. I have mutual fund investments through a broker. I want to invest through an online platform. How can I do this?

You will have to first give a request for change of broker code from the existing broker code to direct.  Once this is done, you will have to change your investments to online folios (if they were purchased offline earlier). You can then check the procedure of the online platform and register accordingly.

34. I am investing currently through an online platform. Is it better to move from this platform to myCams?

You can change the transaction platform to myCams or MFU. myCams will allow you to transact in both regular and direct schemes but only of those mutual fund houses which are serviced by CAMS. MFU will allow you to transact in any scheme of any mutual fund. 

35. What is the platform to check my mutual fund portfolio performance?

There are many websites like moneycontrol.com where one can upload investment details and get a snapshot of scheme performance.

36. Who are the registrars for mutual funds and what is their role?

Registrar or transfer agents are the trusts or institutions that register and maintain detailed records of the transactions of investors for the convenience of mutual fund houses.

Most of the mutual funds are serviced by two registrars which are Computer Age Management Services (CAMS) and Karvy.

37. How do I get a consolidated statement of all my mutual fund holdings?

You can get a consolidated account statement of all financial transactions made across all mutual funds and also other securities held in Demat mode if you have registered your e-mail address with mutual funds. You may request for electronic CAS of your holdings across all mutual funds to your registered email address at any time.

You can register for eCAS by registering at:

https://www.camsonline.com/InvestorServices/COL_ISAccountStatementCKF.aspx

38. Can I take a loan against mutual funds? How?

Yes, you can take a loan against your mutual fund holdings in the form of an overdraft facility and interest is charged only on the amount availed as credit.

The amount given as loan will be lower than the market value of the units held by the borrower.

The loan can be availed via online or offline modes. A lien would be marked on the mutual fund units in favour of the bank or financial institution. Once lien is marked, the units cannot be sold or redeemed by the investor. For this investor needs to fill a form asking for marking of lien with all details of the mutual fund account like folio number, scheme, number of units, etc.

39. My SIP is maturing next month. By when do I need to renew it?
Renewal form and ECS mandate for SIP should be given at least 30 working days prior to the last SIP date to ensure uninterrupted investment.

40. What happens if I miss a SIP instalment?

Units would not be allotted for that particular instalment in your mutual fund folio. The next SIP would again be scheduled and would go as per schedule.

You can skip out on a maximum of 3 consecutive installments of SIP without any risk of turning it inactive.

All you will have to face is charges by your bank for not maintaining sufficient funds in the account.  

41. Does an investor need to submit change of Address request directly to the AMC?

Since KYC is now mandatory for all the investments irrespective of the amount, the investor needs to submit the Change of Address details request to POS of CVL using KYC Details Change Form. Once the address details are updated at CVL, the same will be automatically updated in AMC database.

42. What are the mandatory fields which an investor needs to fill in the Application form?

The investor needs to mandatorily fill the below details in the Application forms.
• Name of the investor
• PAN No
• KYC
• Bank Details (Bank Name, Account No, Branch, City, MICR Code / IFSC Code)
• Demat Account details (if Demat mode is ticked)
• Date of Birth & Guardian details (if the applicant is minor)
• Mailing Address
• Signature

43. Can an investment done on behalf of the minor investor be jointly held by other investors?

No. If the investment is done on behalf of the minor then Minor will be the sole and first holder without any joint holders in the folio.

44. Who can act as the Guardian for the minor in the folio?

Guardian in the folio on behalf of the minor should either be a natural guardian (i.e. father or mother) or a court appointed legal guardian.

45. Why is it necessary for an investor to register for email id & Mobile no in the folio?

An investor can register for email id & Mobile no in the folio to get instant transaction alerts from our end. Mobile No. and Email id is also compulsory for creating a Username for transacting online in MF Online.

46. Can an investor add/remove joint holders in an existing folio?

No. The investor cannot add/remove the joint holders in an existing folio out of his own will.

47. Can a minor act as a Joint Applicant?
No.

48. Can an investor make investment in MF by making the payment through Cash or using his Credit Card?

No, the investor cannot make the investment payment through Cash or using his Credit Card.

49. Can a POA holder sign the Nomination form?
No.

50. What if an individual does not wish to nominate in the folio?

In case investor does not wish to nominate for a specific folio / account then he shall provide a declaration to that effect in the Common Application Form under Nomination Section wherein provision to that effect is already made.

51. Can a minor be nominated in a folio?

Nominee can be a minor however guardian should sign the application on behalf of the minor nominee. Same guardian cannot be first / second folder for the same folio/ account.

52. Is it mandatory for all the holders in a given folio to sign the registration/cancellation of Nominee?

Yes, it is mandatory for all the holders in a given folio to sign the registration/cancellation of Nominee even if the mode of holding is not Joint.

53. How many Maximum Nominations are allowed in the folio?

Three.

54. Who is not allowed to nominate in the folio?

Unitholder being either parent or lawful guardian on behalf of a minor and an eligible institution, societies, bodies corporate, HUF, AoPs, BoIs and partnership firms shall have no right to make any nomination.

55. Who can be made a nominee in the folio?

Resident Indian / NRI(Including Minor), Central Government, State Government, a local authority, any person designated by virtue of his office or a religious or charitable trust.

56. Is date of birth of the minor mandatory at the time of opening the account/folio?

Yes.

57. What is Bharat Bond ETF? 

Bharat Bond Exchange Traded Fund (ETF) is managed by Edelweiss AMC. It is a basket of bonds issued by central public sector enterprises/undertakings or any other government organization bonds. Bharat Bond ETF has a fixed maturity period (3 years and 10 years) like close-ended mutual funds and the units will be listed on stock exchanges.  The ETF shall include AAA-rated bonds issued by PSUs. 

58. What is NAV / Net Asset Value?

Net Asset Value is the sum total of the current value of all the investments held in the portfolio after deducting expenses. The market value changes everyday and this is reflected in the Net Asset Value of the scheme. Net Asset Values are declared daily.To calculate the number of units an investor can purchase or redeem in a scheme, NAV is used as a number.

59. How often is the NAV declared?

NAV is required to be disclosed by the mutual funds on a regular basis – on all business days or weekly – depending on the type of scheme.
The NAV is computed by dividing the fund’s net assets by the number of units outstanding on the validation date and is illustrated below:

Market value of the fund’s investment + Other current assets + Deposits – All Current Liabilities except Unit Capital, Reserves and Profit & Loss Account
________________________________________
No. of Units outstanding

Since the value of the various securities keep changing, the NAV also changes on a daily basis.
The NAVs are available on the websites of mutual funds.

60. I have old physical shares in my grandfather’s name. The company says the shares have gone to IEPF. What is IEPF and how to claim my grandfather’s investments?

Investor Education and Protection Fund (IEPF) is an authority of Government Of India that manages unclaimed investments in various financial instruments.

·        First apply to the company for transmission of shares in your favour. Submit death certificate, succession certificate and other required documents for the same.

·        Once done, company will issue entitlement letter in your name.

·        Next, file an IEPF claim on the Ministry Of Corporate Affairs website.

·        Then send relevant documents to the company for approval.

·        Once company approves, IEPF will scrutinise documents and approval claim in your favour.

    61.    Can I invest into shares and mutual funds from my mother’s account? 

As per SEBI Third Party Transaction guidelines, you can carry out transactions from your mother’s bank account only if you are one of the holders in that bank account. 

62. What are the types of Mutual Funds?

Equity, Debt and Hybrid Funds
Equity categories: Multi Cap Fund, Large Cap Fund, Large & Mid Cap Fund, Mid Cap Fund, Small Cap Fund, Dividend Yield Fund, Value Fund, Contra Fund, Focused Fund, Sectoral / Thematic Fund, ELSS.
Debt categories : Liquid Fund, Ultra Short Duration Fund, Low Duration Fund, Money Market Fund, Short Duration Fund, Medium Duration Fund, Medium to Long Duration Fund, Dynamic Bond, Corporate Bond Fund, Credit Risk Fund, Banking and PSU Fund, Gilt Fund, Gilt Fund with 10 year constant duration, Floater Fund.
Hybrid Funds :Conservative Hybrid Fund, Balanced Hybrid Fund, Aggressive Hybrid Fund, Dynamic Asset Allocation or Balanced Advantage, Arbitrage Fund, Equity Savings.

63. Can an investor choose any date in a month as his / her SIP date?

Each mutual fund house has a set of dates for SIP like 7th, 10th, 15th etc. Investors can choose any date of the month from these options for SIP debit from the account.

64. What are the various modes to invest in SIP?

Investor can choose Standing Instructions / ECS mandate or give post dated cheques.

65. If you are New investor to Mutual Fund, what are the documents required to start SIP?

Common application form, KYC acknowledgment form, SIP registration cum mandate form, original cancelled cheque, if SIP through cheques, then the investor needs to submit 6 postdated cheques.
These documents needs to be submitted at official Point of Transaction acceptance centre.
If you are an existing investor, customer need not submit the KYC details, but all other previously mentioned documents needs to be submitted.

66. What is ELSS (Equity Linked Savings Scheme)?

It Is an Equity Mutual Fund that qualifies for tax exemptions under section 80C of Income Tax act, which helps you save tax and also gives an opportunity to grow your money.

Can I put my money into ELSS scheme for tax benefit and withdraw the next year?
No. An investment under ELSS is locked for 3 years from the date of investments. Also keep in mind that ELSS is a type of Equity fund, hence investment time period should be for at least more than 7 years.

67. What is tracking error?

Tracking error is the difference between the particular mutual fund scheme’s returns and the benchmark returns. Higher the deviation from the benchmark returns, higher would be the tracking error of the scheme.

68. Why does the same Index fund has different NAV for same plan across different fund managers?

The constituents of the particular index may change sometimes. The fund manager however may take some time to replicate the change, hence leading to tracking error. Due to this, the NAV of different index funds could be different.

69. How long one should invest in SIP/ELSS if one has no goal?

One should invest as per time horizon.

70. What is the recommended Asset allocation by age group?

The asset allocation depends upon the financial goals & risk profile. Thus, the asset allocation differs for each individual.

71. Should withdrawal from mutual funds be goal based?

One could withdraw from mutual funds when they are closer to their goals or because of underperformance of the mutual fund scheme or to book profits if asset allocation is too skewed.

72. What is expense ratio in mutual funds?

Expense ratio is the annual fee that an investor is charged by the Asset Management Company for the management of their funds. It includes annual operating costs including management fees, allocation charges, advertising costs, etc. of the fund.

73. What are the risk factors involved in government bonds, corporate bonds, and debt funds?

Some of the risks involved in fixed income securities like bonds and debt mutual funds are interest rate risk, credit risk or default risk, reinvestment risk, etc.

74. Are debt fund returns guaranteed?

No

75. Do we have Mutual funds available for international equities?

Yes, there are international mutual funds available which invest in international stocks or stocks.