F.A.Q
Is Investing in Mutual Funds Risky?
Well, it’s impossible to compare different categories of mutual funds across the board and say that they are risky. Different mutual funds differ in their financial objectives and also invest in different kinds of securities that reflect the ultimate aim of the scheme. Thus, the risk varies substantially depending on the securities that the fund. As an investor, you should understand that although keeping money in a safe is one right way to prevent it from losing, there is always the risk of inflation that will, over time, erode the value of that saving.
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.
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Long term Capital gains tax (if held for more than a year) for equity mutual funds are taxed at 12.5% for gains withdrawn exceeding ₹1.25 lakh in a financial year. Gains withdrawn up to ₹1.25 lakh in a financial year are exempt from Tax.
Is SIP or Lump Sum Investment Better?
A SIP helps spread over time during both rising and falling markets. SIPs ensure that you invest regularly and helps you develop the habit of investing whereas, in lump sum investing, individuals who have a large amount of money can deposit it as a one-time down payment. One invests in lump sum depending on their risk-appetite, investment tenure, and investment objective. A combination of lumpsum and SIP helps enrich and diversify your investments.
Mutual Funds or Equity Stocks - Which One Is Better?
Both are market-linked instruments; however, the problem with direct equity is that a small section of people can make an investment in them in the right manner. These are the ones who are adept with the rules of how the market works, and they don’t require much suggestions or tips. But there are times when even the prudent investors feel that they are doing the right thing, and they end up losing big time when the markets make a turn. This is where mutual funds take the lead. They are managed by experienced fund managers and the investment made is also diversified which helps you to earn good returns without exposing to higher risk.
Is it Okay to Wait for the Market to Correct When Investing in Mutual Funds?
Well, there is no such thing as timing the market, especially when the investment avenue is mutual funds. One must understand that timing the market is not even possible by experts who have been in the industry for long. For all such cases, investment in long-term equity funds is highly recommended as it has consistently outperformed all the other asset classes and works well against the rising inflation. They may be volatile in the short-term period, but they have the potential to create exceptional returns and stable wealth in the long-term horizon.
What is an Expense Ratio?
Expense Ratio is referred to as the fee that an investor pays in lieu of the management done and other costs involved in the maintenance of the particular scheme. This comes out of the invested value of the investor.
If Mutual Fund Scheme is Wound Up, What Happens to Investors’ Money?
In case of winding up of a scheme, the mutual funds refund to the unitholders whose names appear in the Unit Holders’ Register value of their outstanding Units at prevailing NAV, after adjustment of all expenses. Unitholders are entitled to receive a report on winding up from the mutual fund which gives all necessary details.