Mutual funds collect money from investors and use it to buy a mix of assets. The returns from these investments, minus expenses, are then distributed among the investors based on their holdings.
There are various types of mutual funds, including equity funds (investing in stocks), bond funds (investing in fixed-income securities), money market funds (investing in short-term, low-risk securities), and hybrid funds (mix of asset classes).
NAV is the per-unit price of a mutual fund and represents the total value of the fund's assets minus liabilities. It's used to calculate the value of an investor's holdings.
Lock in period is the time during which an investor can not withdraw/redeem his/her investments. Some mutual fund schemes like ELSS/Tax saving funds come with a lock-in period of 3 years as mandated by the government. This essentially means that the investments cannot be redeemed before a period of 3 years from the date of investment in any circumstances.
SIP is a method of investing in mutual funds where you invest a fixed amount regularly, typically monthly. It allows investors to benefit from rupee cost averaging and the power of compounding.
Yes, certain Mutual Fund Schemes such as Equity Linked Savings Scheme (ELSS) help you reduce your taxable income by 1.5 lac under Section 80C of the Income Tax Act if you have opted for the Old Tax Regime.
Long-term Capital gains tax (if held for more than a year) for equity mutual funds are taxed at 10% for gains withdrawn exceeding ₹1 lakh in a financial year.
Gains withdrawn up to ₹1 lakh in a financial year are exempt from Tax.
Short Term Capital gains tax (if held for less than a year) on equity mutual funds’ investments is 15%.
Some Mutual fund schemes have an exit load, and some schemes don’t. The schemes which have an exit load will incur a small charge if they redeem/withdraw their investments before the stipulated time. For example, a mutual fund scheme with an exit load of 0.25% for 3 months, will incur a charge of 0.25% if the investment is withdrawn before 3 months of investment. Please note that the same fund will not incur any charges if the investment is withdrawn/redeemed after a period of 3 months.
Mutual funds carry risks associated with the assets they invest in. Common risks include market risk, interest rate risk, credit risk, and liquidity risk. The value of your investment can go up or down.
Mutual funds are not guaranteed or insured by the government. However, they are regulated, and their safety depends on the quality of the underlying assets and the fund manager's expertise.
Expense ratios represent the annual costs of managing a mutual fund, including management fees and other expenses. Lower expense ratios are generally more favorable for investors.