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Mutual Fund Premier: Part II - Who should invest in Mutual Funds?

 

 

Mutual Funds can meet the investment objectives of almost all types of investors. Younger investors who can take some risk while aiming for substantial growth of capital in the long term will find growth 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). Investors in middle age can allocate their savings between income funds and growth funds and achieve both income and capital growth. Investors who want to benefit from regular savings, save a small sum every month, can use the Systematic Investment Plan

 

What is Net Asset Value?

 

Net Asset Value is the market value of the assets of the 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

 

What is Sale Price?

 

Is the price you pay when you invest in a scheme. Also called Offer Price. It may include a sales load.

 

 What is Repurchase Price?

 

Is the price at which a Close-Ended scheme repurchases its units and it may include a back-end load. This is also called Bid Price.

 

What is Redemption Price?

 

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.

 

What is Sales Load?

 

Is a charge collected by a scheme when it sells the units. Also called, 'Front-end' load. Schemes that do not charge a load are called "No Load' schemes.

 

What is Repurchase Load ?

 

Is a charge collected by a scheme when it buys back the units from the unit-holders

 

What is Offer Document?

 

Offer Document

The document containing the details of the new scheme that the AMC or sponsor prepares for and circulates to the prospective investors is called the Offer Document

 

Importance for the Investors

The Offer Document is the most important source of the information from the perspective of the prospective investor

 

Contents of Offer Document

 

The offer documents issued by mutual funds in India are required by SEBI to include the following information.

Ø        Details of the Sponsor and the AMC

Ø        Description of the Scheme and the investment objective/strategy

Ø        Terms of Issue

Ø        Historical Statistics

Ø        Investor's Rights and Services

 

Where can an Investor get application form?

 

The applications are usually available at all the Mutual Fund branch locations and the Registrar Branch locations in the locations where the Mutual fund operates. On request, the application could be sent by e-mail to the customer or by courier. The customer has to take a print out of the application form fill in the details and submit it at the nearest Investor Service Center

 

 What are the cut off timings?

 

Cutoff timing is the time before which an investor has to submit his/her application form to decide the transaction date. Depending on the time at which the application form is submitted/lodged, the transaction date is decided. Depending on the transaction date the NAV is applicable

 

What is my Current Value of Investments

 

The Current Value of Investment is the 'Market Value' of the Investment based on that day's NAV of the Investment in the invested Scheme - Plan of a Mutual Fund.

 

At what time is the NAV declared?

 

On all business days, depending on the scheme type, NAV is declared in the evening after 7.30PM.

 

When will I receive my account statement? I made my investment today.

 

Once you make an Investment with a selected Mutual Fund the Statement of Account should reach the Investor with in 3-4 days from the date transaction.

 

I have not received my account statement or Dividend/Redemption Warrant?

 

Once you make an Investment with a selected Mutual Fund the Statement of Account should reach the Investor with in 3-4 days from the date transaction. Where as in the case of Dividend and Redemption Warrants, the Warrants should reach the Investor with 10-12 days from the date of transaction.


If the documents do not reach you, you can approach the nearest Investor Service Center or send a email to the customer care Mai lid of the respective fund or call up the toll free number of the concerned Mutual Fund to find out the details regarding the delay in receiving the above mentioned documents.

 

What is the procedure for Redemption?

 

The Investor needs to fill in the redemption application available on the foot of your account statement, which needs to be signed by all the account holders in case the mode of holding is "joint". In case the mode of holding is "any one or survivor", the application can be duly signed by any one of the account holders. The duly filled in application form is to be sent to the nearest Investor Service Center. The units shall be redeemed to you at the redemption price applicable for the transaction date on which your application was received at the Investor Service Center. In case your application is received after the cut-off time, the applicable transaction date would be the next business day

 

What are the benefits of a systematic investment plan?

 

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 for them. This disciplined approach to investing will provide you with the following benefits

·  Power of Compounding

·  Rupee Cost Averaging

·  Convenience

 

What is the Rupee Cost Averaging?

 

The rupee cost averaging is mainly not to produce sudden, dramatic profits but to generate sustained growth over the long term, despite short-term fluctuations in the market. Opting for a Systematic Investment Plan for a Mutual Fund Scheme where an investor can get into Systematic Investment Plan can get the advantage of Rupee Cost Averaging.

 

Can the redemption proceeds be directly credited to my bank account?

 

When an investor has an account in a designated direct credit bank for a particular Mutual Fund, based on a redemption request, the redemption proceeds can be credited directly to your bank account. Please note procedure for direct credit may vary from fund to fund.

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