Frequently asked questions
Mutual fund is an investment option which consists of pooled money from various investors that are later invested in stocks, securities, money market, bonds, etc. These investments are managed by well-qualified professionals. The funds may be collected through a Lumpsum or SIP (Systematic Investment Plan) mode of investment, as per the strategy and investment objective of the fund.
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.
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)
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.
Yes, you can switch investments from one scheme to another within the same Mutual Fund company. This is known as a "switch" transaction. Mutual fund companies typically allow investors to switch their investments between different schemes they offer. This can be useful if you want to reallocate your portfolio based on changing market conditions, risk preferences, or financial goals. However, there might be certain conditions and charges associated with switching, so it's important to understand the terms and fees before making a switch.
Investing in Mutual Funds offers several benefits. They provide diversification by pooling money from multiple investors and investing it across a variety of assets. This diversification helps reduce risk. Mutual Funds are managed by professional fund managers, so you don't need to actively manage your investments. They also offer accessibility, as you can start investing with a relatively small amount. Mutual Funds are available in various categories catering to different risk profiles and financial goals, making them suitable for both beginners and experienced investors.
Multi Cap and Flexi Cap Funds are both equity Mutual Funds that invest in stocks across different market capitalisations. The main difference lies in their investment approach. Multi Cap Funds are required to invest in stocks across all market caps (large, mid, and small caps) in a proportion defined by regulations. On the other hand, Flexi Cap Funds have more flexibility in choosing their allocation to different market caps based on the fund manager's outlook and market conditions. In essence, Flexi Cap Funds have the flexibility to tilt their allocation more towards a specific market cap depending on their investment strategy.
Planning for retirement using Mutual Funds involves setting long-term financial goals, estimating the corpus required for retirement, and choosing appropriate Mutual Fund schemes. Generally, a mix of equity and debt Mutual Funds is recommended to balance growth potential and risk. As retirement is a long-term goal, investors can take advantage of compounding by investing consistently over time through Systematic Investment Plans (SIPs). It's important to review and adjust your investment strategy periodically based on changing life circumstances and market conditions.
Ans. Direct Mutual Fund platforms are considered safe for investing as they allow you to invest directly with the Mutual Fund company without involving intermediaries like brokers or distributors. This can potentially result in lower fees and expenses, which could lead to higher returns over the long term. However, the safety of your investments primarily depends on the reputation and credibility of the Mutual Fund company. It's recommended to invest with well-established and regulated Mutual Fund companies to ensure the safety of your investments.
Target Maturity Funds, also known as Fixed Maturity Plans (FMPs), are a type of Debt Mutual Fund. They have a fixed maturity date and typically invest in debt securities that align with their maturity horizon. These funds are suitable for investors looking for relatively stable returns over a specific time period. Since FMPs invest in debt securities with similar maturity dates, they aim to minimise interest rate risk. However, investors should be aware that these funds might have liquidity constraints as they are designed to be held until maturity.
Growth and Dividend are two different options available to investors in Mutual Funds. In the Growth option, any gains made by the fund are reinvested, leading to the growth of the fund's NAV (Net Asset Value) over time. The investor benefits from capital appreciation. In the Dividend option, the fund periodically distributes dividends to investors based on the gains it has realied. The NAV of the fund reduces by the dividend amount. Dividend option is more suitable for those seeking regular income, while Growth option is focused on capital appreciation.
Debt Funds are suitable for investors with a lower risk tolerance who are looking for relatively stable returns. They invest primarily in fixed-income securities like government bonds, corporate bonds, and money market instruments. Debt Funds are ideal for short- to medium-term financial goals, such as saving for a down payment on a house or funding a child's education. They are generally considered less risky compared to equity funds, but they also offer potentially lower returns.
Interest rate changes have a direct impact on Debt Funds. When interest rates rise, bond prices tend to fall, leading to a decrease in the NAV of Debt Funds. Conversely, when interest rates decrease, bond prices tend to rise, resulting in an increase in the NAV of Debt Funds. Therefore, the performance of Debt Funds is influenced by the prevailing interest rate environment. It's important to consider interest rate trends when investing in these funds.
Debt Funds come in various categories based on the type of securities they invest in and their investment strategies. Some common types include:
- Liquid Funds: Invest in very short-term debt instruments, suitable for parking surplus funds temporarily.
- Income Funds: Invest in a mix of government and corporate bonds for steady income.
- Gilt Funds: Invest in government securities (gilts), considered relatively low-risk.
- Corporate Bond Funds: Focus on corporate bonds, offering potentially higher returns but also higher risk.
- Short-Term Funds: Invest in bonds with slightly longer maturities than liquid funds, aiming for better returns.
- Dynamic Bond Funds: Adjust their portfolio based on interest rate expectations.
- Credit Opportunities Funds: Invest in lower-rated (higher-yield) corporate bonds, carrying higher credit risk.
Investing in Equity Linked Savings Schemes (ELSS) can be done through both SIP (Systematic Investment Plan) and lump sum modes. The choice depends on your investment strategy, risk tolerance, and financial circumstances. SIPs allow you to invest a fixed amount regularly, reducing the impact of market volatility through rupee cost averaging. Lump sum investments can be beneficial if you have a larger amount to invest and believe the market is at an advantageous point. It's important to align your investment approach with your financial goals.
The minimum investment amount for a Mutual Fund can vary based on the fund's category and the fund house's policies. It can range from as low as ₹100 to ₹5,000 or more. Some funds offer lower minimums for SIP investments compared to lump sum investments. It's advisable to check the specific Mutual Fund's investment guidelines to know the minimum investment required.
CAGR stands for Compound Annual Growth Rate. It's a measure of the average annual growth rate of an investment over a specific period, considering the effects of compounding. CAGR provides a smoothed annual growth rate, which is especially useful for evaluating the performance of investments over multiple years. Unlike a simple average, CAGR accounts for the compounding effect on returns, giving a more accurate representation of the investment's growth.
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