What is Mutual Fund?

A mutual fund is a collection of money from multiple investors that is used to buy a variety of securities, such as stocks and bonds. Professional money managers, known as asset management companies (AMCs), run the fund and decide when to buy and sell securities.
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What is Mutual Fund Investment?
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4 mins read
24-September-2024

A mutual fund is an investment instrument that pools money from numerous investors to invest in a diversified pool of securities such as equities, bonds, and other money market instruments. Mutual funds have become one of the most widely invested instruments as they make up for effective diversification, which spreads the risks across numerous securities and offers steady returns to investors. Among numerous investment instruments you can invest in, mutual funds ensure investment discipline through systematic investment over time. Since professional portfolio managers manage the investments, they carry lower risk than other investment instruments.

If you are an investor or are looking to invest to build wealth over time, it is ideal to add mutual funds to your portfolio. This blog will help you understand what is a mutual fund and how it can help you earn good returns in the long term.

What are mutual funds?

A mutual fund’s meaning refers to an investment instrument that invests in several other securities to create an individual portfolio by pooling money from numerous investors. Once the individual portfolio of various securities is created, investors are given mutual fund units based on their investment amount. The pooled money and the resulting investments are managed by professional fund managers who make investment decisions based on the fund’s objectives and strategies.

There are numerous types of mutual funds, such as equity funds, bond funds, money market funds, debt funds, hybrid funds, etc. The value of the mutual fund is determined daily based on the total value of its assets minus liabilities. The price at which you buy or sell shares is based on the Net Asset Value (NAV) per share.

Here is a simple example to understand what is a mutual fund in simple words:
Imagine you are having a get-together at your house and want to buy snacks for the party. The kind of snacks you want to buy will cost Rs. 100. You and your three friends pool Rs. 25 each and buy a variety of snacks such as chips and drinks. You bought 4 bags of chips and 4 drinks, and as per individual contribution, each person will receive a bag of chips and a drink. Just like your group pools money to buy snacks, investors pool their money into a mutual fund.

How do mutual funds work?

Here's how mutual funds work:

Aspect

Description

Pooling of funds

Mutual funds aggregate capital from multiple investors to create a pooled investment fund. Each investor holds shares, and the fund's total value is determined by the net asset value (NAV), calculated based on the collective value of assets.

Professional management

Expert portfolio managers oversee mutual funds, making strategic investment decisions to meet the fund's objectives. Their goal is to optimise returns while prudently managing risk through careful asset allocation and selection.

Diversification

Mutual funds invest in a diversified range of securities, including stocks, bonds, or a blend of both. This diversification spreads risk across different assets, mitigating the impact of poor performance in any single investment.

Investor shares

Individuals purchasing mutual fund shares acquire ownership in proportion to their investment. The quantity of shares an investor possesses reflects their stake in the overall fund.

Net asset value (NAV)

NAV represents the per-share market value of the mutual fund. It's computed by dividing the total value of assets within the fund's portfolio by the number of outstanding shares. Investors buy or sell shares at the NAV price, which fluctuates based on market conditions.

Liquidity

Mutual funds provide liquidity, enabling investors to buy or sell shares on any business day at the closing NAV. This flexibility allows for relatively easy entry into or exit from positions, enhancing investment accessibility.

Returns and distributions

Mutual funds generate returns through capital appreciation, interest income, and dividends from underlying securities. Profits are distributed to investors in the form of cash or additional shares, often accompanied by periodic income distributions.


Features of benefits of mutual funds

Here are some of the key features and benefits of mutual funds:

Feature

Benefit

Description

Diversification

Reduced risk

Spread your investment across multiple assets, lowering risk compared to investing in individual stocks.

Professional management

Expertise & active management

Fund managers with expertise actively manage your investments, monitoring and rebalancing the portfolio.

Transparency

Informed decisions

Access Scheme Information Documents and daily NAV (Net Asset Value) to track your investment.

Liquidity (Open-ended funds)

Easy access to funds

Redeem your investments on business days and receive funds within 1-3 days (except close-ended and ELSS funds with lock-in periods).

Tax savings (ELSS)

Reduced tax liability

Up to Rs. 1.5 lakh invested in ELSS qualifies for tax deduction under Section 80C of the Income Tax Act.

Wide investment choice

Align with your goals

Choose from various funds like liquid funds, flexi-cap funds, or solution-oriented funds to suit your investment needs.

Cost-effective

Economies of Scale

Pooled investments allow access to a broader range of assets at lower costs compared to individual investing.

Potential for high returns

Long-term growth

Equity funds have the potential for double-digit annual returns, while debt funds can outperform bank deposits.

Well-regulated industry

Investor protection

SEBI regulations ensure investor protection, risk mitigation, liquidity, and fair valuation of mutual funds.
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Different types of mutual funds

There are many different types of mutual funds available in India. Some of the most popular types include:

  • Equity funds: These funds invest primarily in stocks of companies, aiming for long-term capital appreciation. They can be categorised based on market capitalisation (large-cap, mid-cap, small-cap), sector focus, or thematic investments. Read more about, What are equity funds.
  • Debt funds: Debt funds invest in fixed-income securities like government bonds, corporate bonds, and other debt instruments. They offer regular income and are relatively lower in risk compared to equity funds. Read more about, What is a debt fund.
  • Hybrid funds: Also known as balanced funds, these invest in a mix of equity and debt instruments to achieve a balance between growth and income. Read more about, What are hybrid mutual funds.
  • Index funds: These funds aim to replicate the performance of a specific stock market index, like the Nifty 50 or Sensex. They offer a passive investment approach. Read more about, What are Index Funds.
  • Sector funds: Sector funds concentrate on specific sectors of the economy, such as technology, healthcare, banking, etc. These can be riskier due to their concentrated focus.
  • Tax-saving funds(ELSS): Equity-Linked Savings Schemes (ELSS) offer tax benefits under Section 80C of the Income Tax Act. They have a lock-in period of three years.
  • Liquid funds: These funds invest in short-term money market instruments, providing high liquidity and safety for short-term parking of funds. Read more about, What are liquid mutual funds.
  • Gilt funds: Gilt funds invest in government securities, which are considered to be among the safest investments. They are suitable for conservative investors. Read more about, What are gilt mutual funds.
  • Gold funds: These funds invest in gold-related instruments, offering investors exposure to the price movement of gold without owning physical gold. Read more about, What is a gold fund.
  • Thematic funds: Thematic funds invest in a specific theme or idea, such as infrastructure, consumption, or sustainability. Read more about, What are thematic funds.
  • Multi-asset allocation funds: These funds invest in a mix of equity, debt, and other assets to provide diversification across various asset classes.
  • Retirement funds: Also called pension funds, these are designed to help investors save for their retirement and offer tax benefits. Read more about, What is a retirement fund.
  • Dividend yield funds: These funds focus on investing in stocks that offer high dividend yields, aiming to provide regular income to investors. Read more about, What are dividend yield funds.
  • Aggressive growth funds: These funds aim for high capital appreciation by investing in high-growth potential stocks. Read more about, What are aggressive hybrid mutual funds.
  • International funds: Also known as overseas funds, these invest in international markets and provide Indian investors exposure to global stocks and bonds. Read more about, What are International Mutual Funds.
  • Overnight funds: These funds invest in one-day maturity securities, overnight positions expose the traders to risk from adverse movements that occur after normal trading closes often used by corporates for fund parking. Read more about What are overnight funds.
  • Money market funds: MMFs focus on short-term government securities and similar instruments (less than a year maturity), considered to be ideal for stable, non-volatile investments with minimal interest risk.
    Read more about, What are money market funds.
  • Banking and PSU funds: A minimum of 80% of their investments are into debt securities issued by banks, public sector undertakings (PSUs), municipal bonds, and public financial institutions, among others. These are suitable for short to medium-term investment needs. Read more about, What are thematic PSU mutual funds.

Modes of investing in mutual funds

There are two modes of investing in mutual funds:

  • Lumpsum investment: When you possess a substantial amount for investment, the lumpsum mode allows you to invest the entire sum at once. For instance, if you have Rs. 10 lakh to invest, you can opt for a lumpsum investment, allocating the entire amount in a chosen mutual fund. The units you receive depend on the Net Asset Value (NAV) of the fund on that particular day. If the NAV is Rs. 100, your investment of Rs 10 lakh would secure you 10,000 units of the mutual fund. Lumpsum investment offers a quick entry into the market, capturing the fund's current value in one go. You can also take help of lumpsum calculator to predict the future value of your investments.
  • Systematic Investment Plan (SIP): For those looking to invest smaller amounts periodically, the Systematic Investment Plan (SIP) is a flexible and convenient option. In contrast to lumpsum, SIP allows investors to commit to regular investments over time. Suppose you can invest Rs. 1,000 per month for 12 months. SIP aligns with your cash flows, promoting consistent and disciplined investing. Whether monthly, or quarterly, SIP adapts to your financial rhythm. This approach not only accommodates budget constraints but also leverages the benefit of rupee cost averaging over time, mitigating the impact of market volatility.

Pros of mutual fund investing

  1. Liquidity: Mutual funds offer easy liquidity, allowing investors to buy or sell units at the current Net Asset Value (NAV), providing quick access to their invested money.
  2. Diversification: Diversified portfolios spread across various assets minimise risk, ensuring that the impact of poor performance in one investment is balanced by others, fostering stability.
  3. Minimal investment requirements: With mutual funds, even investors with limited funds can participate, as they often have low entry requirements, making investing accessible to a broader audience.
  4. Professional management: Expert fund managers handle mutual fund investments, leveraging their knowledge and skills to make informed decisions, optimising returns for investors.
  5. Variety of offerings: Mutual funds provide a diverse range of investment options, catering to different risk appetites and financial goals, ensuring there's a suitable choice for every investor.

Cons of mutual fund investing

  1. High fees and commissions: Some mutual funds may come with fees and commissions that can eat into returns, impacting the overall profitability of investments.
  2. Market risks: Investments in mutual funds are subject to market fluctuations, and the value of the fund can go up or down based on economic conditions and market movements.
  3. Evaluating funds: Selecting the right mutual fund can be challenging, requiring investors to navigate through numerous options, assess performance history, and understand fund strategies.
  4. No guarantees: Mutual funds carry no guarantees of returns, and investors may experience losses, especially in volatile market conditions, emphasizing the importance of thorough research and risk awareness.

Ideal investors for mutual funds: Are you one of them

Mutual funds are ideal investment instruments because a long-term investment can multiply significantly because of the compounding effect, where the interest is compounded and increases with every cycle. Although there are no restrictions on who can invest in a mutual fund, they are particularly well-suited for the following types of investors:

  • Beginner investor: Mutual funds are managed by expert portfolio managers, making them ideal for those new to investing who may not have the knowledge or time to pick individual stocks or bonds.
  • Risk-averse investors: Mutual funds have lower associated risk when compared to other investment instruments. They offer effective diversification, which spreads risk across a variety of assets, making them ideal for investors with a lower risk tolerance.
  • Investors with a low capital amount: Investors can start investing in mutual funds through SIPs with an amount as low as Rs. 100. Hence, they are ideal for investors who want to start investing with a relatively small amount of money.
  • Retirement savers: Mutual funds allow wealth to be built over time due to compounding. Many mutual funds are designed for long-term growth, making them a good option for individuals saving for retirement or any other big future expense.
  • Income seekers: Certain types of mutual funds, like bond or dividend-focused funds, are designed to provide regular income, making them ideal for investors who need a steady cash flow.

Understanding mutual fund fees

Mutual funds pool money from various investors and employ a portfolio manager, who uses the pooled money to invest in a host of securities such as equities, bonds, etc. Each investor owns units or shares of the mutual fund, representing a portion of its holdings. However, the mutual fund house levies a few fees on the investor for managing the mutual fund and earning from the buying and selling of the mutual fund units. It is important to understand all the attached fees in a mutual fund scheme in detail, as they can lower your investment value over time.

Here are the fees associated with investing in mutual funds:

Expense ratio

The expense ratio is the annual fee the mutual fund house charges for a specific scheme, payable by the investors. The fund house levies this fee for its work to manage the overall mutual fund scheme. The expense ratio is represented as a percentage of the fund’s average asset under management (AUM). The expense ratio includes numerous costs, such as management, administrative, marketing, and distribution costs. For example, if the expense ratio of a mutual fund house is 1.5% and you’ve invested Rs. 10,000, you will pay Rs. 150 per year as a fee.

Entry load

An entry load is a charge levied by a mutual fund house on investors when they buy mutual fund units in a specific mutual fund scheme. It is a one-time charge and covers the distribution costs and initial expenses of the fund. However, in 2009, the Securities and Exchange Board of India abolished entry loads for most mutual funds . This means that most mutual funds do not charge entry loads.

Exit load

An exit load is a fee the mutual fund house charges from investors when they sell or redeem their existing mutual fund units within a specific timeframe. The main aim of levying the exit load on investors is to discourage them from selling their mutual fund units in the short term and ensure that they remain invested for the long term. For example, the mutual fund house may charge an exit load of 1% if you redeem your units within one year of purchase. After this period, the exit load usually drops to zero.

Management fee

The management fee is included in a mutual fund scheme's expense ratio and compensates the fund manager for their expertise and work managing the fund’s portfolio. The management fee varies depending on the fund’s strategy and the level of active management involved. Actively managed funds usually have higher management fees compared to passively managed funds (like index funds) because they require more research and active decision-making.

Classes of mutual fund shares

Mutual funds offer different classes of shares, which significantly vary in their fee structure and benefits. Class A shares have a front-end load, which requires the investors to pay a sales charge or a commission at the time of purchasing the units. These shares generally have a lower annual expense ratio compared to other mutual fund classes.

Class B shares require investors to pay a fee when selling the units. The fee, called contingent deferred sales charge (CDSC), is a reducing fee that becomes zero after several years. Class B shares generally have higher annual fees than Class A shares and often convert to Class A shares after a predetermined period.

Class C shares come with no front or end load but have a small back-end load if they are sold within a year. They also come with a higher expense ratio but do not convert to Class A shares like Class B shares.

Understand mutual fund taxation

When you sell your mutual fund units, you earn capital gains and are liable to pay a tax on them based on the period after which you have sold the units. The mutual fund taxation laws were changed by the Finance Ministry in the new Union Budget of 2024. Now, for equity funds, short-term capital gains (STCG) are taxed at 20%, while long-term capital gains (LTCG) above Rs. 1.25 lakh are taxed at 12.5%. For debt funds, STCG is taxed as per the investor’s income slab, and LTCG is taxed at 12.5% without indexation.

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How to calculate mutual fund returns?

Calculating mutual fund returns involves several methods, each offering unique insights into investment performance.

  1. Absolute returns: Absolute returns measure the overall percentage change in a mutual fund's value over a specific period, irrespective of time or compounding. Calculated using the formula:
    Absolute Return = (Present NAV – Initial NAV) / Initial NAV × 100
    For instance, if your initial NAV was 30 and the present NAV is 45 over nine months, the absolute returns would be 50%.

  2. Annualised returns: To assess annual returns, Simple Annualized Return (SAR) is used. Derived from the absolute return, the formula is:
    SAR = [(1 + Absolute Rate of Return) ^ (365/number of days)] – 1
    Considering the previous example,
    Simple Annualised Return = [(1 + 50%) ^ (365/270)] – 1
    Therefore, with a 50% absolute return, the simple annualized return is approximately 73%.

  3. Compounded Annual Growth Rate (CAGR): CAGR offers an average annual growth rate over multiple years, providing a standardized measure. The formula is:
    CAGR = {[(Present NAV / Initial NAV) ^ (1 / Number of years)] - 1} × 100
    To calculate the compounded annual growth rate (CAGR) for a lump sum investment, let's use the given example:
    Assuming you invested Rs. 10 lakh in a mutual fund scheme in 2016 with an initial NAV of Rs. 200, and after five years in 2021, the NAV increased to Rs. 700.
    CAGR = {[(700 / 200) ^ (1 / 5)] - 1} × 100
    CAGR ≈ 28.47%
    Alternatively, if you prefer using Excel, you can use the RRI function:
    =RRI(Nper, PV, IV)
    Where:
    Nper = Time in periods (calculated in months)
    PV = Present Value (ending value)
    IV = Initial Value (beginning value)
    This will give you the CAGR, which you can format as a percentage to obtain the result.

  4. Extended Internal Rate of Return (XIRR): XIRR is an advanced method accounting for timing and amount of cash flows. It's crucial for investments with varying durations, such as Systematic Investment Plans (SIPs). The formula is:
    XIRR = XIRR(Values, Dates, Guess)
    To calculate SIP returns using XIRR in Excel, create a table with SIP dates and amounts, add redemption details, and use the XIRR function, formatting the result as a percentage. This method provides accurate returns when cash flows vary.

Terms used in mutual funds

Here is the brief terminology used in mutual funds:

  • AMC or fund houses: Asset Management Company manages all aspects of the mutual fund, including marketing, collections, investments, and investor transactions.
  • NAV: Net Asset Value represents the market value of the mutual fund's investment portfolio divided by the total number of units, serving as the price for buying or redeeming mutual fund units.
  • SIP: Systematic Investment Plan involves regular and periodic investments in mutual funds to average out investment costs, offering flexibility in investment frequency (monthly or quarterly).
  • NFO: New Fund Offer denotes the period when a mutual fund opens for investments from investors for the first time, typically lasting fifteen days.
  • AUM: Assets Under Management represents the total value of investments managed by the mutual fund.
  • CAGR: Compound Annual Growth Rate signifies the proportional growth rate from year to year for a mutual fund.
  • Exit load: Exit load is the fee charged by AMC to investors who exit mutual funds during the lock-in period and redeem their investments.
  • XIRR: Extended Internal Rate of Return calculates aggregate returns on investments when both inflows and outflows occur irregularly over time.

How to invest in mutual funds?

Here is the process of investing in mutual funds in India:

  • Investment goals: Determine your investment goals, risk tolerance, and investment horizon before investing. This will help you analyse and compare various mutual funds.
  • Open an account: Open an account with a stockbroker or financial institution. You can also open an account on the mutual fund company’s website.
  • Complete your KYC: Complete the Know Your Customer (KYC) process while opening the account. You can do this online through eKYC or offline by submitting documents like ID proof, address proof, and a photograph.
  • Choose mutual funds: Analyse and compare various mutual funds based on your investment goals, risk tolerance, and time horizon. Consider mutual funds across types such as debt, equity, hybrid, balanced, etc.
  • Select investment mode: Determine whether you want to invest a lump sum amount or through a Systematic Investment Plan (SIP). If through SIP, choose the investment amount and the frequency.
  • Monitor your investment: Regularly review your mutual fund’s performance to ensure it meets your financial goals, risk tolerance, and horizon, and make adjustments if necessary.

Conclusion

Mutual funds offer a smart way to get into investing without needing to understand everything about the stock market. With so many different types of funds available, there is something for everyone's financial goals. Whether you are saving for a significant dream or building a financial safety net, mutual funds could be your key to a better financial future. So start investing now.

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Frequently asked questions

What is a mutual fund in simple words?

A mutual fund is a pooled investment scheme where funds from multiple investors are aggregated and invested in various assets such as stocks and bonds. Investors own units in the fund, and the fund's performance dictates the value of these units.

Is mutual fund good or bad?

Mutual funds can be beneficial or detrimental depending on factors like investment objectives, risk appetite, and fund performance. While they offer diversification, they also carry market risk. Thorough research and understanding individual financial goals are crucial for determining suitability.

Is mutual fund SIP safe?

Mutual fund Systematic Investment Plans (SIPs) are generally considered safe for long-term investors. SIPs offer advantages like rupee-cost averaging and disciplined investing, which help mitigate market volatility over time. However, all investments carry some level of risk.

Can I withdraw mutual funds anytime?

Most mutual funds allow investors to withdraw their funds at any time, subject to specific conditions such as exit loads or minimum holding periods. It's advisable to review the terms and conditions of the fund before making withdrawals.

Is mutual fund tax-free?

Mutual funds are not entirely tax-free. Depending on factors such as the type of fund, holding period, and gains, investors may be subject to taxes like capital gains tax on their mutual fund investments.

Are mutual funds profitable?

Mutual funds can be profitable but returns are not guaranteed. They vary based on factors like market conditions, fund performance, and investment strategy. Past performance does not assure future results.

Can I invest Rs. 100 in a mutual fund?

Some mutual funds allow investors to start with small amounts like Rs. 100 through systematic investment plans (SIPs). This feature enables even small investors to participate in the financial markets gradually over time.

What are the risks of mutual funds?

Risks associated with mutual funds include market risk, liquidity risk, credit risk, and interest rate risk. Additionally, specific types of funds may carry additional risks, such as sector-specific funds or international funds.

Can a mutual fund go to zero?

While it's rare, a mutual fund can theoretically become worthless if all the investments within the fund lose their value. However, prudent diversification and professional management typically mitigate this risk significantly.

How do I buy mutual funds?

Investors can buy mutual funds through various channels, including online platforms, financial advisors, or directly from the fund house. They need to complete the necessary KYC (Know Your Customer) formalities, open an account, and select suitable funds based on their investment goals and risk tolerance.

How are mutual fund fees regulated in India?

In India, mutual fund fees are regulated by the Securities and Exchange Board of India (SEBI), which sets limits on the total expense ratio (TER) that funds can charge.

How is the cost of a mutual fund unit calculated?

The cost of a mutual fund unit is determined by its Net Asset Value (NAV). NAV is calculated by dividing the total value of the fund’s assets (like stocks, bonds, and cash) minus its liabilities by the total number of units outstanding.

Who manages a mutual fund?

Mutual funds are managed by a professional fund manager or a team of managers who make investment decisions based on the fund's objectives. They select and monitor the securities in the fund’s portfolio to achieve the best possible returns for investors.

What are the risks associated with mutual funds?

Mutual funds carry market risk, where the investment value can reduce due to price fluctuations in the securities prices. They also have liquidity risk if the fund cannot easily sell assets to meet redemptions. Furthermore, fund-specific risks, like poor management decisions, are also risky.

How do mutual fund fees affect my investment?

Mutual fund fees, such as expense ratios and management fees, reduce your overall returns by reducing a portion of your investment gains or principal. Higher fees can significantly impact long-term gains, especially with compounding.

What are the tax implications of investing in mutual funds?

The tax implications of mutual funds depend on the type of fund and the holding period. For equity funds, short-term capital gains (STCG) are taxed at 20%, while long-term capital gains (LTCG) above Rs. 1.25 lakh are taxed at 12.5%. For debt funds, STCG is taxed as per the investor’s income slab, and LTCG is taxed at 12.5% without indexation.

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Disclaimer

Bajaj Finance Limited (“BFL”) is an NBFC offering loans, deposits and third-party wealth management products.

The information contained in this article is for general informational purposes only and does not constitute any financial advice. The content herein has been prepared by BFL on the basis of publicly available information, internal sources and other third-party sources believed to be reliable. However, BFL cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed. 

This information should not be relied upon as the sole basis for any investment decisions. Hence, User is advised to independently exercise diligence by verifying complete information, including by consulting independent financial experts, if any, and the investor shall be the sole owner of the decision taken, if any, about suitability of the same.

Disclaimer:

Bajaj Finance Limited ("BFL") is registered with the Association of Mutual Funds in India ("AMFI") as a distributor of third party Mutual Funds (shortly referred as 'Mutual Funds) with ARN No. 90319

BFL does NOT:

(i) provide investment advisory services in any manner or form:

(ii) carry customized/personalized suitability assessment:

(iii) carry independent research or analysis, including on any Mutual Fund schemes or other investments; and provide any guarantee of return on investment.

In addition to displaying the Mutual fund products of Asset Management Companies, some general information is sourced from third parties, is also displayed on As-is basis, which should NOT be construed as any solicitation or attempt to effect transactions in securities or the rendering any investment advice. Mutual Funds are subject to market risks, including loss of principal amount and Investor should read all Scheme/Offer related documents carefully. The NAV of units issued under the Schemes of mutual funds can go up or down depending on the factors and forces affecting capital markets and may also be affected by changes in the general level of interest rates. The NAV of the units issued under the scheme may be affected, inter-alia by changes in the interest rates, trading volumes, settlement periods, transfer procedures and performance of individual securities forming part of the Mutual Fund. The NAV will inter-alia be exposed to Price/Interest Rate Risk and Credit Risk. Past performance of any scheme of the Mutual fund do not indicate the future performance of the Schemes of the Mutual Fund. BFL shall not be responsible or liable for any loss or shortfall incurred by the investors. There may be other/better alternatives to the investment avenues displayed by BFL. Hence, the final investment decision shall at all times exclusively remain with the investor alone and BFL shall not be liable or responsible for any consequences thereof.

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Disclaimer on Risk-O-Meter:

Investors are advised before investing to evaluate a scheme not only on the basis of the Product labeling (including the Riskometer) but also on other quantitative and qualitative factors such as performance, portfolio, fund managers, asset manager, etc, and shall also consult their Professional advisors, if they are unsure about the suitability of the scheme before investing.