Mutual Funds FAQs

Mutual funds are generally classified according to the asset class. Most mutual funds are divided into Equity, Debt, and Hybrid.

• Equity: These Mutual Funds invest mostly in equity stocks (up to 100%). ELSS/Tax saver subcategory within equity allows tax benefits under section 80C of the Income Tax Act and has a lock-in period of 3 years.
• Debt: These mutual funds invest in debt instruments like bonds, treasury bills, etc. (except equity).
• Hybrid: Hybrid mutual funds invest in a combination of Equity and Debt investments.

There are two ways of investing in mutual funds – Lumpsum and SIP.
Lumpsum is a method of investing a corpus in one go. It is usually used when an investor tries to time the market.
SIP is a method of investing a fixed amount at regular intervals, similar to a recurring deposit. The most important benefit of SIP is averaging the cost of buying and investors don’t have to constantly time the market.
 

SWP or Systematic Withdrawal Plan is a type of mutual fund plan wherein the investor has the option to withdraw fixed amounts at a periodic frequency, like monthly or quarterly. The investor may choose to withdraw only the gains or sell a few units and get the money. It is perfect for people who need a source of regular income.

You can invest in mutual funds with Bajaj Finserv’s end-to-end online process. in a paperless and hassle-free manner with BajajFinserv. Follow these simple steps:
Step 1: Download the Bajaj Finserv app from the play store or visit the Bajaj Finserv website.
Step 2: Login using your mobile number
Step 3: From the ‘Investment’ widget, click on the ‘Mutual Funds’ tab
Step 4: Enter your basic details like PAN number, bank account details etc. and your account will be activated in 5 mins.
Step 5: Start investing with Bajaj Finserv by selecting funds where you want to invest and make payment via net banking / UPI / NEFT/ RTGS

There are 3 important documents that disclose all details of funds for customer benefit. These are - key information memorandum (KIM), scheme information document (SID) and statement of additional information (SAI).
They must be made available with every application form.

In case there is insufficient amount in the account, a SIP instalment is missed. Missing a SIP instalment is not penalised by mutual funds. The bank will nevertheless assess a fee for your failure to make the auto-debit payment and inadequate cash. A mutual fund will only terminate the SIP after three consecutive missed payments. The current investments will continue to generate income.

Mutual fund rating is a measure of a fund's performance and is assigned considering its historical risk and returns performance while comparing it to other funds in the same category. Mutual funds are rated by independent agencies like CRISIL, Value Research, Morningstar etc.

In the case of Growth option, profits gained on the funds remain invested in the market, which grows together with the principal amount invested. Whereas, in case of Dividend option, profits are paid back to the investor periodically instead of investing it in the market.

NAV or Net Asset Value, is the market value of the funds. These values change every day and is the price at which an investor will buy or sell funds.

An Asset Management Company (AMC) offers two types of plan, i.e. Direct Plan and Regular Plan. Direct Plans are directly offered by a fund house, without the involvement of agents or third-party distributors. Such plans have a lower expense ratio than regular plans. Apart from the expense ratio, everything else stays the same.
The difference in expense ratios between regular and direct plans can
range from 0.5% to 1%. This difference directly affects the returns of regular and direct plans. If the expense ratio of a regular plan is 0.75% more than that of a direct plan, then the direct plan will give a 1% higher CAGR (compounded annual growth rate) return than the regular plan.

Mutual funds are market-linked and there is no way to predict the market. The value of an asset can increase or decrease which makes them subject to market risk.

The Lock-in period is a time wherein the investors can't redeem or sell their units without paying a charge (Exit load). An exit load of 1% is usually charged if Equity funds are withdrawn before a year. However, investors may sell their funds anytime after the lock-in period without any charge.
For instance, in the case of an ELSS plan or tax saving mutual funds, a lock-in period of 3 years is applicable during which an investor can't exit the fund at all.

Gain or Loss on redemption of mutual funds is called Capital Gains/Loss. The period of holding investment defines whether it is Short Term Capital Gain (STCG) or Long Term Capital Gain (LTCG).
The rate of tax depends on the holding period of the investment and the type of asset.

Equity funds:
i) Minimum holding period for LTCG - 1 year
ii) Tax implication in case of STCG - 15% + 4% cess = 15.60%
iii) Tax implication in case of LTCG - 10% + 4% cess = 10.40% (if the long-term gain exceeds Rs 1 Lakh)

Non-Equity funds:
i) Minimum holding period for LTCG - 3 year
ii) Tax implication in case of STCG - As per the tax rate of the investor (30% + 4% cess = 31.20% for investors in the highest tax slab)
iii) Tax implication in case of LTCG - 20% with indexation

Dividend distribution tax (DDT) in the case of both Equity and Non - Equity Funds:
10% TDS (Tax deducted at source) on dividend income exceeding INR 5,000
The information being shared is on a best-effort basis. Please consult an independent tax consultant before taking the final decision.

A folio number is a unique number issued by Asset Management Company (AMC) and can be used to identify your holdings with a specific mutual fund.
If you have an existing investment with us and wish to view folio details, you can find it using the below steps:
i) Go to the portfolio page
ii) Select investment details against which you wish to view folio details.

This could be due to any of the reasons mentioned below:
i) There is a 30-day difference between your first payment and the next instalment date or
ii) You have cancelled your SIP or
iii) Your SIP deduction date falls on a weekend/holiday. In this case, the amount gets deducted on the next working day or
iv) Your autopay is still not activated or you have not registered autopay yet

Applicability of exit load depends on the scheme in which you have invested. Therefore, we recommend that you check the terms and conditions of the scheme before making a switch.

Risk profiling is the process that is used to assess your capability and willingness to take risks. It helps in selecting the appropriate product for you.

KYC is the short form of 'Know Your Customer’.
This is a mandatory process set up by the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI). It verifies your identity and addresses details while capturing information related to your financial status and occupation. It is a centralized process (stored in a central database) and comes in handy as customers need not submit their documents repeatedly for new investments.

Stamp Duty will apply to transactions involving unit creation like Purchase (Lumpsum or SIP), Switch-in, Systematic Transfer Plan (STP) and Dividend Re-investment.