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Mutual Fund is a mechanism for collecting funds from investors by issuing units to them and then investing funds in securities on behalf of them. Investments in securities are spread across various sectors and industries, thereby minimizing the risk of losing money. The profits or losses are shared by all the investors in proportion to their investment.
The investors of mutual funds are called unit holders. Mutual fund units are issued to the investors in proportion to the quantum of money invested by them. A mutual fund is required to be registered with Securities and Exchange Board of India (SEBI) which regulates securities markets before it can collect funds from the public.
Mutual funds are packed with a bundle of benefits. A few are mentioned below:
Mutual funds are pooled investments. A common pool of money invested by many investors is managed by fund investment managers. The fund managers have in-depth knowledge about how the market works and they use their skills and judgment in investing the total amount, which is called corpus. The corpus is invested in securities like shares, debentures and money market instruments. Profit generated through these investments is then distributed amongst investors in proportion to their investments made.
Mutual funds are known best for minimizing the risks involved in market investments through its diverse and professional management. Yet, the risks led by price fluctuation, liquidity, credit risks, etc. cannot be avoided. An investor may select schemes prudently depending on his risk taking capability, keep a track of market happenings and take proactive actions if needed.
Equity based funds have higher exposure to risk since investments are made in the stock market and are suited for the high risk takers. Investors who have lower risk exposure may opt for debt funds as the risk exposure is relatively lower. Average risk takers have the option of investing in Hybrid funds which involve investment in equity and debt in pre-determined proportion.
Mutual Funds are among the most transparent collective investment vehicles in India. They are under the scrutiny of the Securities and Exchange Board of India (SEBI). SEBI protects the interest of the capital market investors and ensures prudent functioning of mutual funds.
SEBI has mandated elaborate investment guidelines and reporting requirements to ensure that mutual fund investments are under its regulatory purview. It also stipulates the investment of money by the investors and their valuation on an ongoing basis.
Association of Mutual Funds in India (AMFI), a trade body of mutual funds in India also involves itself in devising compliance and best practices guidelines in the industry to ensure professional ethics.
Yes, non-resident Indians can also invest in mutual funds. NRIs will get all the details pertaining to this in the offer documents of the schemes.
Asset Management Company (AMC) is essentially a Mutual Fund company that invests the funds collected by its mutual fund schemes into securities as specified in the investment objective of each particular scheme. They provide the investors with more diversification and investing options than they would have by themselves.
NAV or Net Asset Value is the per unit market value of the mutual fund. It is the price at which investors purchase or sell fund units. It is calculated by dividing the total value of all the assets in a portfolio, minus the liabilities by the total number of units of the scheme. Since market value of underlying holdings changes every day, the NAV of a scheme also varies on a day to day basis. For example, if the market value of securities of a mutual fund scheme is Rs 100 lakhs and the mutual fund has issued 10 lakhs units of Rs. 10 each to the investors, then the NAV per unit of the fund is Rs.10. NAV is required to be disclosed by the mutual funds on a regular basis - daily or weekly - depending on the type of scheme.
NAV for every mutual fund scheme is declared at the end of every business day. It plays a key role in mutual fund investments. One can find the NAV details in newspapers, mutual fund websites or the website of the Association of Mutual Funds in India (AMFI) - www.amfiindia.com.
NAV (in Rs terms) = Market or Fair Value of Scheme's investments + Current Assets - Current Liabilities and Provision / Number of Units outstanding under Scheme on the Valuation Date
Schemes are defined as per the Maturity Period:
It is a good practice to monitor the performance of the mutual fund schemes one has invested in at fixed intervals. This helps to take timely decisions in case they need to exit from the investment. Investors can monitor their investments with:
If investors are investing in schemes like ETFs, then they must have a Demat account as these schemes are compulsorily allotted in Demat mode. For allotment in physical mode there is no need for a Demat account. As per recent developments, units of all mutual funds schemes can be allotted in both the modes i.e. Physical as well as in Demat. Also, the depositories have allowed the DPs to facilitate holding of mutual funds in Demat account.
In a Direct Plan a mutual fund scheme allows investors to invest in it by directly interacting with the Asset Management Company. There is no need of involving a broker or a distributor. The option of investing in a scheme through direct plan is mandatory by the SEBI Circular no. CIR/IMD/DF/21/2012, dated September 13, 2012.
Yes. All categories and types of investors can invest in Direct Plans as per the needs of the portfolio. One needs to be careful that the investments are not routed through any distributor or broker.
The most important difference between a Regular Plan and Direct Plan is the involvement of a broker and brokerage in the transaction. In a Regular Plan, one invests through a broker, while in a Direct Plan; one can directly interact with the Asset Management Company without involving a broker. As the commission payment is skipped in Direct Plan, the expense ratio is less than the existing plan of the same mutual fund scheme. The NAVs of the two plans also differ as the expenses charged on both the plans are not the same.
A New Fund Offer or NFO is either an offer for a new mutual fund scheme being launched by a company or the launch of additional units of existing close-ended funds that are available for investing.
The dividend option distributes gains through dividends declared. The fund pays out dividend to the investors and upon payment, NAV of the unit drops by that percentage. Debt schemes also have to pay dividend distribution tax on the dividend distributed. This tax payment also costs the NAV. The reduced NAV, after a dividend payout, is called ex-dividend NAV. After the announcement of the dividend, and until it is paid out, it is referred to as cum-dividend NAV. The dividend option does not change the number of units held by the investors. The investor receives the dividend while the NAV goes down to reflect the impact of the dividend paid, and if applicable, the dividend distribution tax on the dividend.
A little different from dividend option is a dividend re-investment option. The NAV declines to the extent of dividend and the distribution tax. But unlike in dividend option, the investor’s dividend is re invested in the same scheme and the investor is given additional units calculated based on the dividend amount and prevailing NAV.
The growth option declares no dividend, which means there are no re-investment options either. The dividend distribution tax is also not applicable on these funds. This is why the NAV would capture the full value of portfolio gains in the growth option.
SIPs help in investing a fixed amount at specified periods in various mutual funds scheme. It is a great way to bring discipline in investment habits and helps investors plan for their future. 3 prime benefits of investing in SIP:
SWP is an investment that allows investors to withdraw money from their existing mutual fund account at predetermined intervals. If the investor wants a steady stream of cash inflows from the investments, opting for SWP serves is the best choice.
To balance the risk factor involved in investing lump sum of investment money in equity fund or debt fund, Systematic Transfer Plan is the best option. STP could be seen as a combination of SIP and SWP, wherein the investor transfers a fixed amount of money from one scheme to another, usually between debt fund and equity fund. The investor here can avoid the risk of investing all of capital in equity mutual fund as this investment could be risky subject to markets’ volatility and its relative impact on returns in equity fund. On the other hand, investment only in debt fund will create moderate income. An STP thus helps to strike a balance between risk and return. It helps average the risk and returns involved in investments. If investors already have investment in equity scheme but want to exit, they can avoid the risk of a sharp fall in equity markets on the date of lump sum withdrawal by using STP. Investing in STP will help in gradually pulling out money from equity funds.
STP invests a specific amount at specific intervals in an equity fund. This helps in averaging the cost of equity investment as more units are received when prices are falling and lesser units are received when prices are rising. STP rebalances the portfolio by reallocating investments from debt to equity or vice versa. If investment in debt increases, the money can be reallocated to equity funds through systematic transfer plan and if investment in equity goes up, money can be conveniently switched from equity to debt fund.
There are two types of STPs:
The option offered to investors to shift their investment from one scheme to another within that fund is called a Switch. The process of switching involves a fee. Switching is a good way for the investors to allocate their investment among the schemes in order to match their altering investment needs, risk profiles or changing circumstances during their lifetime.
Know Your Customer (KYC) is a process of to identify and verify the identity of a company’s clients. In order of make the process uniform and to avoid duplication in the process across the intermediaries in the securities market; SEBI vide Circular No. MIRSD/SE/Cir-21/2011 dated October 5, 2011, SEBI (KYC Registration Agency) Regulations, 2011 and Circular No. MIRSD/ Cir-26/ 2011 dated December 23, 2011 introduced the concept of KYC Registration Agency (KRA) effective January 01, 2012.
Fill the new KYC application form:
Documents evidencing Proof of Identity and Proof of Address to be provided (List of requisite KYC documents for individuals and non-individuals are mentioned in the revised KYC Application Form)
In-Person Verification (IPV): Complete IPV from any of the following:
Submit the KYC form along with necessary documents at the nearest Investor Services centre or any other intermediaries of KRA's as mandated by SEBI. Upon receipt and verification of the above documents, a KYC acknowledgement will be issued to each applicant.
Investor must ensure that KYC compliance is mandatory at the time of submission of each subscription request with the designated Official Points of Acceptance. In case of applications without valid KYC are liable to be rejected. Once the investor has done the KYC with a SEBI registered intermediary, the investor need not undergo the same process again with another intermediary including Mutual Funds. However, the AMC reserves the right to carry out fresh KYC of the investors or undertake enhanced KYC measures to commensurate with the risk profile of investor. The existing KYC compliant investors can continue to invest as per the current practice. But in case of any updation in the process, they must comply with the new KYC requirements including IPV as mandated by SEBI.
If PAN and KYC details of the investors are already updated in the company’s records then they don’t need to repeat the formalities. In case any further details are required as per new regulations, the investor will be notified. They can then submit the details at any of the mentioned service centres. New investors who have not completed their KYC process need to complete formalities as per SEBI’s KRA regulations.
When an investor purchases units of Mutual Funds, a non refundable fee is added to the units’ NAV by the Asset Management Company. This fee is termed as entry load.
When an investor redeems or transfers his units between schemes of mutual fund, a non refundable fee is deducted from the NAV at the time of such transaction by the Asset Management Company. This fee is known as exit load.
When investors sell units of open-ended scheme, the redemption price at that time is called redemption price. The redemption price is same as NAV, unless the fund levies an exit load in which case the redemption price will be lower than NAV.
The price at which a close-ended scheme repurchases its units is called repurchase price. Repurchase can be at NAV as well as have an exit load.
In case investors are holding units of Mutual Fund in the physical form i.e. represented by a Statement of Account (SOA), they can convert the units in dematerialized form in their demat account with any Depository Participant (DP) of NSDL or CDSL. Investor can use their existing demat account for this purpose.
Please note, once mutual fund units are in demat form, investors can sell/ redeem units either through stockbroker through exchange platform (currently BSE STAR MF and NSE MFSS) or through their Depository Participant
Baroda BNP Paribas Mutual Fund offer units of various schemes (Direct and Regular both option) in demat form. Investor should mandatorily mention the details of depository name (NSDL / CDSL) and Beneficiary id (in case of CDSL: 16 digits and in case of NSDL, DP id 8 digit and client id 8 digit) in the subscription form. It is advisable to enclose copy of latest Client Master List (CML) received from the DP along with complete application form. Investor must ensure that the Demat account mentioned is in active status and should not be inactive /closed/suspended for debit/credit. Investor must ensure that Name (s) of the applicants, PAN, Tax status, holding pattern mentioned in the application form should match with Client master list. Post allotment, the said units shall be credited to the Demat account mentioned in the application form. Investor can verify the same in their holding statement obtained from the DP.
Yes, provided the demat account is opened under the NRI category
If the key details (Name (s) of the applicants, PAN, Tax status, holding pattern, etc.) mentioned in the application form are not matching with the details as per DP, the units will be issued in Physical form and SOA will be issued to the investor.
If investor are holding units in physical form (SOA), investor may convert them in demat form through their DP. The procedure for converting mutual funds units held in SOA form to demat form is as below:
Re-materialisation is the process of converting units from demat mode to physical mode i.e. SOA mode
Below is the process to re-materialise mutual funds:
You can redeem your mutual fund units held in demat form through DP or through stock exchanges (through stockbroker), process as follows:
Through DP:
Through broker in exchange platform:
Yes. Switch transaction is permissible only through the Stock Exchange Platform.
In case of any modifications of bank account, address, contact details, nomination, etc. in the demat folios, the investor needs to get it modified in the DP account through depositories participant (DP). DP follows prescribed guidelines for such profile modifications as formulated by respective Depositories (NSDL/CDSL) in their operating manual. There is no need for the investors to provide any request to RTA as the basic information are shared by both NSDL/CDSL to RTAs on weekly basis.
Investor should approach Depository Participant for issuance of an account statement. The AMC/RTA will not send any account statement in respect of Units bought in demat mode or accept any request for statement as the units will be credited in the demat account.
**basis portfolio of the Scheme as on March 31, 2024
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them
**Basis constituents of the scheme as on March 31, 2024
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
*The PRC matrix denotes the maximum risk that the respective Scheme can take i.e. maximum interest rate risk (measured by MD of the Scheme) and maximum credit risk (measured by CRV of the Scheme)
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Disclaimer:
1. NAV of the selected fund will be sent on the next working day. For example NAV of Monday will be sent on Tuesday.
2. At a time, you are allowed to subscribe to at most 3 schemes for daily/weekly/monthly updates.
3. For daily alerts, the NAV of the selected scheme will be sent the next morning.
4. For weekly alerts, the NAV of the selected option will be sent every Monday morning.
5. For monthly alerts, the NAV of the last applicable date of the month will be sent on the 1st of the subsequent month.
6. The weekend NAVs of Liquid schemes will be sent on the subsequent Monday.
7. Receipt of the SMS alert is subject to validity of the mobile number and availability of network. Baroda BNP Paribas is not liable in case of either of these two being insufficient.
