Mutual Funds

Mutual Fund FAQs

• What Is A Mutual Fund And How Does It Work?

  Mutual funds are one of the most popular investment options these days. A mutual fund is an investment vehicle formed when an asset management company (AMC) or fund house pools investments from several individuals and institutional investors with common investment objectives. A fund manager, who is a finance professional, manages the pooled investment. The fund manager purchases securities such as stocks and bonds that are in line with the investment mandate. Mutual funds are an excellent investment option for individual investors to get exposure to an expert-managed portfolio. Also, you can diversify your portfolio by investing in mutual funds as the asset allocation would cover several instruments. Investors would be allocated with fund units based on the amount they invest. Each investor would hence experience profits or losses that are directly proportional to the amount they invest. The main intention of the fund manager is to provide optimum returns to investors by investing in securities that are in sync with the fund’s objectives. The performance of mutual funds is dependent on the underlying assets.

• How to choose a suitable mutual fund?

  A right fund plan cannot be chosen only by considering the past performance of the fund and fund manager. To choose the right mutual fund, you need to check if the fund’s investment objective is in line with your goals.

• How can you redeem your mutual fund units?

  You can redeem MF units anytime. You need to inform your fund house or the agent. Your money will be deposited to your bank account within 3- 7 working days, post-redemption.

• How to Save Taxes With Mutual Funds?

  You can save up to Rs 46,800 a year in taxes by investing in equity-linked savings scheme (ELSS), the best tax-saving investment under Section 80C. The asset allocation of ELSS mutual funds is primarily made towards equity and equity-linked securities. ELSS mutual funds are the best tax-saving investment under Section 80C of the Income Tax Act, 1961. They come with a lock-in period of just three years, the shortest among all tax-saving investments. These mutual funds have the potential to provide returns in the range of 12% to 15%.ELSS funds are the only tax-saving investment with the potential to offer inflation-beating returns. Therefore, investing in ELSS mutual funds gives you the twin benefits of tax deductions and wealth creation over time.

• What is CRISIL MF ranking?

  CRISIL is an analytical company, which provides rankings, research, and advisory services. MF rankings given by CRISIL depend on global parameters. The rankings are very crucial for investors when they are deciding on a particular scheme.

• Is SIP better than a lump sum?

  It depends on the individuals and the market scenario. If you are risk-averse, then investing in via SIP is advisable. If the markets have fallen record levels, then a lump sum is advisable. Again, you need to assess your risk profile and requirements.

• Do mutual funds invest only in stocks?

  No, mutual funds don’t invest only in stocks. Only equity funds invest in stocks, while debt funds and liquid funds hardly invest in stocks. In fact, there are some debt funds that don’t invest in stocks at all.

• What is an exit load?

  It is the penalty charged by the fund house if you are not able to stay invested over a particular time frame. Most mutual funds are open-ended and come with no exit load. Investors should read the fund offer carefully before investing.

• What is an expense ratio?

  The expense ratio is the fee charged by the fund houses to manage the investments of the investors. It is always less than 2.5% of the amount invested by the investors.

• Are mutual funds safe?

  Yes, mutual fund investments are absolutely safe as all fund plans and fund houses are under the hawk eye of the Securities and Exchange Board of India (SEBI), the Association of Mutual Funds in India (AMFI), and the Reserve Bank of India (RBI).

• Who can invest in mutual funds?

  All individuals who have completed their KYC process are eligible to invest in mutual funds. However, some fund houses don’t accept investments from NRIs living in the United States and Canada due to the FACTA regulations.

• Who Should Invest in Mutual Funds?

  Everyone who has a particular financial goal, be it short-term or long-term, should consider investing in mutual funds. Investing in mutual funds is an excellent way to accomplish your goals faster. There are mutual fund plans that suit all personas. Investors need to assess their risk profile, investment horizon, and goals before getting started with their mutual fund investment. For example, if you are risk-averse and planning to purchase a car in five years, then you may consider investing in gilt funds. If you are ready to take some risk and are planning to buy a house in a period of fifteen to twenty years, then you may consider investing in equity funds. If your investment horizon is less than two years and you are looking to earn higher returns than a regular savings bank account, then you may consider parking your surplus funds in a liquid fund.

• How much do I need to invest in mutual funds?

  There is no fixed amount that you need to invest every year in a mutual fund. Most funds have a minimum investment of ₹1000, but the cumulative yearly investment can be as per your convenience. On ClearTax you can start investing with just ₹ 3000.

• Which documents do I need for mutual fund investment KYC?

  The documents required for KYC are: - 1 passport size photograph - 1 copy of PAN - 1 address proof With these documents, the entire KYC process can be done online when you invest through ClearTax.

• Do I need to get KYC done to invest in tax-saving mutual funds?

  Yes. Know Your Customer (KYC) compliance is mandatory to invest in ELSS funds. But unlike you would think, KYC is not a difficult process. ClearTax has a completely paperless process for KYC which can be completed online.

• Do ELSS mutual funds have additional benefits?

  Tax-saving mutual funds come with the dual benefit of tax saving and wealth creation. They help you not only save taxes but build wealth over the long-term as well because these mutual funds invest primarily in equities and earn higher returns than traditional tax-saving investments like PPF, FDs and NSC.

• How much does ClearTax charge when I invest in mutual funds?

  ClearTax is completely free for you. We do not charge any commission from our users. We get a commission from funds that help us keep our service free and high quality.

• Is it safe to invest in mutual funds via ClearTax?

  ClearTax is registered with the Association of mutual funds (AMFI) under ARN code: ARN110027. Your investments made through ClearTax are 100% genuine. All data and transactions are protected with 128-bit encryption.

• Who gets the money that I invest in mutual funds through ClearTax?

  Your money goes directly to the accounts of the mutual funds that you invest in. it does not come to ClearTax. At the time of redemption, the money will be transferred by the fund company and deposited directly to your bank account.