MUTUAL FUNDS

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MUTUAL FUNDS

What is a Mutual Fund?

A mutual fund is a pecuniary tool consisting of a pool of money collected from different investors to invest in securities like stocks, bonds, etc. Mutual funds are handled by professional portfolio managers, who allot the funds and manage them carefully to generate wealth for the fund’s investors to attain the investment objectives. The mutual fund market is regulated by the Securities Exchange Board of India to ensure responsible and transparent management of the investor’s wealth.

Mutual funds are mainly divided into categories based on:
1) The types of securities they invest in
2) The objective of the investment
3) The type of returns they seek

MUTUAL FUNDS

How Does a Mutual Fund work?


A mutual fund is essentially a trust that gathers capital from investors with similar investment goals. Based on the fund’s objective, the money collected from investors is placed in various avenues such as stocks, gold, bonds and other securities. A fund manager oversees each fund and ensures optimum returns on the money invested. The income generated by the fund is divided and distributed among the investors proportionately.

Types of Mutual Fund

• Equity Funds
• Hybrid Funds
• Debt Funds
• Sectoral Funds
• International Funds

Benefits of Mutual Funds

• Diversification portfolio
• Convenience
• Professional Management
• Begin with small investments
• Tax benefits
• Liquidity

MUTUAL FUNDS

WHAT WE DO


Ckredence Wealth offers mutual fund distribution and investment services. We analyse the needs of our clients, their risk tolerance levels, and financial goals to provide a curated list of funds to invest in based on our understanding of the markets. We conduct various investor education programs like webinars/seminars to keep our clients updated with the latest developments in the MF industry. We also offer special products like value SIP, step-up SIP, and SIP insure SWP system to help our clients benefit from a volatile market. Also, customised suggestion as per Individuals & Company’s need.

Our clients reap the following benefits:


Right Product suggest as investor’s need | Dedicated & knowledgeable RM |Online - Offline support |Tax saving Investment Ideas |Diversified Investment products

FAQs

Mutual Funds are investment schemes professionally managed by financial experts. Many investors, individuals and entities, invest money in these schemes or funds to generate better returns. These investment schemes could invest in Shares / Stocks (Equity), Government and Corporate Bonds / Securities / Debentures (Fixed Income) or a mixture of the Equity and Fixed Income Securities. Mutual Funds are bought and sold in Units. Mutual Fund units are allocated to investors basis the proportion of their investments and value of these units is tracked as Net Asset Value (NAV) which is daily released by the Fund houses. The Securities and Exchange Board Of India (SEBI) regulates the Mutual Funds industry, and there are around 45 different Mutual Fund houses and more than 12000+ Mutual Fund Schemes.

Is there any tax on Mutual Funds?

Long term Capital gains tax (if held for more than a year) for equity mutual funds are taxed at 10% for gains withdrawn exceeding ₹1 lakh in a financial year.

Gains withdrawn up to ₹1 lakh in a financial year are exempt from Tax.
Short Term Capital gains tax (if held for less than a year) on equity mutual funds’ investments is 15%.

What is exit load? How to avoid exit load for my investments?

Some Mutual fund schemes have an exit load, and some schemes don’t. The schemes which have an exit load will incur a small charge if they redeem/withdraw their investments before the stipulated time. For example, a mutual fund scheme with an exit load of 0.25% for 3 months, will incur a charge of 0.25% if the investment is withdrawn before 3 months of investment. Please note that the same fund will not incur any charges if the investment is withdrawn/redeemed after a period of 3 months.

What are various mutual fund scheme options like growth option, dividend option?

Mutual Fund schemes are available in growth and dividend option. Within the dividend option, payout or reinvestment options are available. In the growth option of Mutual fund schemes, profits made by the scheme are invested back into it. This results in the net asset value (NAV) of the scheme rising over time. When the scheme gains, the NAV rises, and in the case of a loss, it goes down. The only option to realise the profit in the growth option is to sell or redeem your investments. The dividend option can re-invest (dividend reinvestment option) or pay out the dividends (dividend payout option) the profits made by the fund. Profits or dividends are distributed to the investor from time to time depending on the profits made. Dividends are declared only when the scheme makes a profit, and it is at the discretion of the fund manager. The dividend is paid from the NAV of the unit.

What are open ended, closed ended and interval funds?

Open-ended funds are those which can be purchased and sold anytime. Closed-ended funds can be purchased from the fund house only at the time of the new fund offering (NFO) and can be sold only once the period of the closed-ended fund has ended. Interval funds have periodic intervals specified by the funds when they can be purchased and sold.

Why are mutual fund investments better than other investment products?

Mutual Funds, historically, have proven to be much better investment avenues than other products available to investors. Investments in MF have proven to be more effective because of the following reasons:

1. Managed by professionals: Financial experts invest in equity and fixed income products invest on your behalf. They are supported by large teams which assist them in analyzing data and dissecting nitty gritty of the markets(macro and micro economic environment, GDP rates, Interest rates and its future outlook, fundamental analysis into each company that they invest or not invest in) which clients as individuals might not be able to do themselves.

2. Better taxation structures: The government of India offers incentives to customers to invest in mutual funds by providing tax structures. So while your fixed deposit returns are completely taxable, Investment in debt mutual funds come with tax indexation benefits (which can lower your taxation burden to almost as low as 2% as opposed to as high as 30% in Fixed deposits). Investments in equity mutual funds have only 10% tax (on gains withdrawn above ₹1 lakh in an year) compared to 30% taxation on FDs. Gains on equity mutual funds withdrawn up to ₹1 lakh in an year are exempt from tax.

3. Better Flexibility: Mutual funds are held in units. So you can always redeem your investment partially while keeping the other investment intact and untouched. This is unlike fixed deposits where you have to fully withdraw your investment and pay pre-mature withdrawal charges on the entire amount.

4. Better liquidity: Open ended mutual funds can be sold anytime. This is unlike investment like Insurance, PPF, NSC, etc. where you have long lock-in periods and large pre-mature withdrawal penalties.

5. Better Diversification: Mutual funds invest in multiple securities. This diversifies the risk for you much better than other investments.

Are returns guaranteed on Mutual Funds?

Mutual funds are market linked instruments. They invest in stocks, fixed income securities, arbitrage opportunities deemed fit by the Fund manager who is a financial expert. These market linked securities can go up or down in value as per the various macro and micro economic conditions. There is no guarantee of return on Mutual funds. The mutual fund returns can vary from past returns as well. We create balanced and personalised portfolios for you based on your Investment Horizon and Risk Profiles while accounting for the prevailing Market Conditions like Stock Markets performance ( Price to Earning, Price to Book, Dividend Yield), Interest Rates, GDP growth Rates and other important macroeconomic factors. We optimise your portfolio to offer maximum possible expected return for a given level of risk through careful selection of asset classes and mutual funds using our proprietary ranking frameworks.

What is a lock-in period? Is there a lock-in period for my investments?

Lock in period is the time during which an investor can not withdraw/redeem his/her investments. Some mutual fund schemes like ELSS/Tax saving funds come with a lock-in period of 3 years as mandated by the government. This essentially means that the investments cannot be redeemed before a period of 3 years from the date of investment in any circumstances.

What are Equity Mutual Funds?

Mutual funds that invest in equity (also called stocks or shares) are called Equity Mutual Funds. The objective of Equity Mutual Funds is the Capital appreciation of the investments. The returns of these Equity funds are tied to the stock markets. Various types of Equity Mutual funds are Large Cap, Small/Mid Cap, Flexicap and Sector Funds.

What are Equity-Large Cap Mutual Funds?

These funds invest in companies which have very capitalization on stock markets. For examples Infosys technologies Limited, TCS, Reliance Industries Limited etc.

What are Equity-Small/Mid-Cap Mutual Funds?

These funds invest in companies which have Small or Mid sized capitalization on stock markets. For examples IndusInd Bank, Blue Dart, Eveready Industries etc.

What are Short Term/Short Term Government Bond Funds?

These funds invest in fixed income and debt instruments with short term maturity. Government bond funds invest only in Central and State government issued securities.

What are Equity-Flexi Cap Mutual Funds?

These funds have the flexibility to invest in companies irrespective of their size. For example, the fund manager can invest in a large cap company like Infosys Ltd as well as Mid Cap company like Blue Dart if he/she believes that the stocks can give better returns.

What are Equity-Sector Mutual Funds?

These funds invest in companies of particular industry sectors or business. For example Technology sector funds invest only in technology companies like Infosys Ltd, TCS, HCL Technologies etc. There are different kinds of sector funds like FMCG, Financial Services, Pharma, Energy, Precious metals etc.

What are Debt Mutual Funds?

These Mutual Funds invest in various debt / fixed income securities like Central and State government securities, money market securities, commercial papers corporate bonds and corporate debentures.

What are Short Term/Short Term Government Bond Funds?

These funds invest in fixed income and debt instruments with short term maturity. Government bond funds invest only in Central and State government issued securities.

What are Debt-Long Term Government Bond Funds?

These funds invest primarily in Government Securities of high term to maturity. Since these funds invest in government bonds there is no credit default risk on these funds.

What are Liquid/Money Market Funds?

These funds invest in Money market instruments and securities with very short term to maturity (lesser than 90 days). These funds are not impacted too much by interest rate movements and typically give very stable returns to the customers.

What are Debt-Corporate Credit Funds?

These funds invest primarily into corporate debt, deposits and debentures.

What are Debt-Intermediate Term/Intermediate Term Government Bond Funds?

These funds invest Securities of medium term to maturity. The Intermediate term government bond funds only invest in government securities.

What are Ultra Short Term Funds?

Ultra short term funds invest in fixed income instruments and debt securities which are mostly liquid and have short term maturities.

What are Arbitrage Funds?

These funds take advantage of the differential pricing between stocks in the Cash market vis a vis the prices of the same stock’s future in the futures markets. Additionally, these funds park their money in short term maturity debt securities and money market securities and hence have very low risk.

What are Balanced–Equity Funds?

These funds invest primarily (above 65%) in stocks and the rest in debt and fixed income securities. These funds have moderate risk as compare to pure Equity funds.

What are Tax Saving Funds or Equity Linked Savings Scheme (ELSS)?

These funds are eligible for tax deductions under Section 80 C. These funds invest in stocks and are hence linked to stock markets. These funds have a lock in period of 3 years and hence the investors can not withdraw their money before the 3 year period.

What are Balanced–Debt Funds?

These funds invest primarily in debt and fixed income securities and the rest money in Stocks. These funds have moderate risk as compare to pure Equity funds.

What is the minimum amount to invest?

Chirag Wealth Application does not impose any restrictions on the minimum investible amounts on its customers.

However, each Mutual Fund Scheme has mandated a minimum amount for One time and SIP investments.Many of the funds have minimum investible amounts as low as Rs 500 / Rs 1000 for both One time as well as SIP payments.For some funds, this amount could be Rs 5, 000/ Rs 10,000.

Chirag Wealth Application mentions the Minimum Amount for One time and SIP investments on the Mutual Fund Pages or you can see the same when you click on 'Invest' or 'Add to cart' on the fund page.

How do I know if my KYC registration is done?

Investors can check this on our platform. Just initiate your registration process, and we would monitor the same at our end and inform you. If your KYC registration is done, you need not do KYC registration again, and you are ready for investments. If your KYC is not done, then you can complete the KYC registration on our platform. It is an entirely paperless process and can be done from the comfort of your home/office.

We have the best interests of our client in our heart, and we believe that nobody does it better than us

How to invest in Mutual Funds?

Investors have to provide documentation mandated by SEBI to get Know Your Client (KYC) registration. This KYC registration can be done Online and Offline. Once the KYC is registered with the SEBI registered entities, investors can start investing in Mutual Funds. This is a one-time activity. Once KYC is registered, Investors can start investing in Mutual Funds through any of the intermediaries.

Why do I have to give my PAN number? Is it safe?

As per regulatory requirements, KYC (Know Your Customer) registration is a must before any investment can be made in Mutual Funds or Stock markets.

As PAN is mandatory to make investments in Mutual Funds and Stock Markets, we need your PAN details to check if your KYC registration is complete.

If your KYC registration is done, then you can immediately transact through the Chirag Wealth Application.

Can I open multiple accounts? I manage my wife's investment as well. Can I do it in a single account ?

As per Regulatory requirements, each investor needs to invest in Mutual Funds through their own bank accounts. For example, if you want to invest for your wife as well, we would suggest opening a separate account for your wife. All investments and money transfers have to happen from your respective accounts.