Things You Must Be Aware About Mutual Funds


Mutual Fund is a scheme launched by the Mutual Fund Houses which collects money from the investors and invest in various stocks, securities and bonds depending on the investment objective of the scheme. In India various mutual funds exist like ICICI Mutual Fund, HDFC Mutual Fund, Birla Sun Life Mutual Fund, IDFC Mutual Fund etc. Each scheme is managed by fund manager.

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There are different kind of mutual fund schemes available in the market depending on the investment objectives.

What does a Mutual Fund do with your money?

The money with the Mutual Fund (called Assets of the Mutual Fund) will be given to an employee (called Fund Manager) to invest as advertised to the initial investors. Fund manager of an equity fund will buy shares of companies (called equity). Fund manager of a debt fund will invest in deposits of companies and/or government (called debt). Depending on how these investments perform, the fund’s assets will change with a corresponding change in the Net Asset Value (NAV) of each unit. Note that the number of units will not change.

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Selecting best mutual funds and mutual fund schemes

There are so many mutual fund houses. Each mutual fund house, offers so many different mutual fund schemes. Your dilemma…Which mutual fund house and mutual fund scheme to choose? This is not a problem, only unique to first time investors, in mutual funds. Even experienced investors find choosing a good mutual fund scheme, a difficult task. Magazines, TV shows and even the internet, flood you with facts and figures on the performance of mutual funds. The first thing you do is to choose a reputed mutual fund house. The next thing….Your mutual fund needs to be managed by a highly skilled and reputed fund manager, backed by an excellent team.

How to invest

You need below documents signed in for your mutual fund investment,

1) Know Your Customer (KYC)

2) Mutual fund Application form & SIP form

3) Address proof

4) Pan card Xerox

5) Cheque Leaf

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Do I need Demat?

Demat helps you to hold all the units in electronic form and it becomes easy to purchase and redeem with demat account than with physical unit. Demat May also hold your shares and it becomes easy to maintain your single investment portfolio under one account. It reduces the paper work involved in purchase of mutual fund as you can log into your Demat account to do any purchases. It also reduces the time taken for the credit of units while dong purchase and time taken for the money to get credited into your account while selling any mutual fund units. Both debt and equity mutual fund can be bought in with this demat account. As of now this is not compulsory.

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