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Mutual funds basics
 

  Mutual funds basics

 

1. What is a mutual fund?

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2. What are the benefits of investing in a mutual fund?

Investing in a mutual fund offers you a gamut of benefits

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3. What is an asset management company (AMC)?

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4. How are mutual funds classified?

Every investor has a different investment objective. Some go for stability and opt for safer securities such as bonds or government securities.

Those who have a higher risk appetite and yearn for higher returns may want to choose risk-bearing securities such as equities. Hence, mutual funds come with different schemes, each with a different investment objective.

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5. What are the different types of mutual funds?

There are hundreds of mutual fund schemes to choose from. Hence, they have been categorized by structure, nature and investment objective.

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6. What does a mutual fund do with my money?

If you have even as little as a few hundred rupees to spare, you can start your investment journey with mutual funds.

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7. How are mutual funds different from portfolio management schemes?

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8. How is investment in a mutual fund different from a bank deposit?

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9. Does investing in mutual funds mean investing in equities only?

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10. How are mutual funds regulated?

SEBI and/or the RBI (in case the AMC is promoted by a bank) regulates all Asset Management Companies (AMCs).

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11. Why are mutual funds a safe investment option?

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.

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12. Why is diversification of funds important?

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13. What is a portfolio ?

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14. What is net asset value (NAV)?

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15. What is load?

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16. What is sale price?

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17. What is redemption/repurchase price?

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18. What is repurchase or back end load?

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19. What is the role of a fund manager?

Fund managers constantly monitor market and economic trends and analyse securities in order to make informed investment decisions.

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20. What are sector funds?

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21. What is the difference between Growth Plan and Dividend Reinvestment Plan?

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22. What is a switching facility?

Investors have an option of transferring the funds amongst different types of schemes or plans with a switching facility.

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23. What is an account statement?

An account statement is a non-transferable document that serves as a record of transactions between the fund and the investor.

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24. Who is a registrar?

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25. What is a Systematic Investment Plan?

SIP is a method of investing a fixed/regular sum every month or every quarter. With the growing everyday expenses, it becomes difficult to accumulate a considerable sum which can be invested at one go.

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26. Why is SIP a great investment option?

The biggest advantage of an SIP is the habit of regular, disciplined savings. Every month, like all other EMIs, this also gets deducted from the bank a/c through electronic clearing service, which is convenient. A SIP does not pinch the pocket much if started at an earlier stage.

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27. What is a systematic withdrawal plan (SWP)?

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28. What is a systematic transfer plan (STP)?

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29. How can STP help you?

If you are looking at gradually exposing yourself to equities or reducing exposure over a period of time, then STPs are a good option.

You than start an STP where every month a pre-determined amount will be invested into an equity fund. This helps in deploying funds at regular intervals in equities with minimum timing risk. This also gives you an opportunity to earn better than saving bank account rate of return.

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30. What does it cost?

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31. What are the types of returns one can expect from a Mutual Fund?

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32. Can the NAV of a debt fund fall?

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33. How do I track the performance of the Fund?

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34. Does out performance of a benchmark index always connote good performance?

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35. Does higher return necessarily mean a better fund?

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36. What should one keep in mind while choosing a good Mutual Fund?

Income, expenses, commitments, financial goals and many other factors vary from person to person.

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37. How important are fund costs while choosing a scheme?

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38. How to decide if the New Fund is an appropriate one for you?

You can start by looking into your financial plan or your existing portfolio. You should analyse the kind of funds in your existing portfolio – if they large cap funds, mid cap funds, flexi cap funds, balanced funds, tax planning funds.

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39. Ideally how many different schemes should one invest in?

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40. What is Employee Unique Identification Number (EUIN)?

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41.  What is the benefit of providing EUIN?

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42. Is it mandatory to provide the EUIN in transaction?

Yes. EUIN is applicable for transactions routed through an ARN holder, which are Advisory in nature, i.e. investment is being made on the basis of advice provided by the employee / relationship manager / sales person of the distributor.

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43. Which type of transactions is covered under EUIN?

Applicable Transactions:

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A Simple Secret that Made the World's Richest Investor Rich - IDFC Mutual Fund
A Simple Secret that Made the World's Richest Investor Rich