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Stock Analysis, IPO, Mutual Funds, Bonds & More

To be able to invest in a liquid fund, the investor should have KYC formalities completed with a KYC registration agency. A KYC form needs to be filled up and documents (address and IDproof) should be submitted, with originals for this purpose.

Bharat Bond ETF will be the first corporate bond debt ETF to be launched in India. The details of companies in the ETF are yet to be finalised.

Many mutual fund houses are coming up with new fund offers and financial planners believe that investors should consider them only if the scheme offers something new. However, an NFO is different from an IPO.

Many investors, especially new ones, get excited whenever a new new fund offer is launched. But is it a wise decision to invest in them?

How are mutual fund investments taxed

Indexation refers to recalculating the purchase price, after adjusting for inflation index, as published by the Income Tax authorities. Since the purchase price is adjusted for inflation, the capital gain gets reduced.

Focused mutual funds have larger exposure to individual stocks, making them rather volatile. This makes it more risky compared to a diversified equity fund.

There are many instances in life, when there is an urgent requirement of funds. To take care of those needs, investors need to build a small kitty of their own.

The more concentrated a portfolio is, the higher the chance for its returns to deviate significantly from the benchmark, either positively or negatively.

Many conservative mutual fund investors want to invest a small part of their investments in equity to enhance their returns. However, their apprehensions about the higher risk and volatility in equity mutual funds prevent them from proceeding with their investment plans.

A beginner’s guide to mutual funds - 9

Hybrid schemes, as their name suggests, invest in a mix of equity and debt. The aggressive ones invest more in equity, whereas the conservative hybrid schemes invest more in debt instruments.

It is very difficult for many individuals to manage their own money. It is tough to study and analyse companies and transact to buy /sell different securities on one’s own.

Many mutual fund investors, especially the new 'direct’ or DIY investors, are worried about the performance of their mutual fund investments in the last one or two years.

Most of the ups and downs in key benchmark indices are point-to-point returns. That means the data doesn’t capture your periodic investments through SIPs. For example, one-year return might be positive because it is looking at the movement of the index from one year ago. However, your SIP returns might be negative during the same period because you have been investing every month. The opposite scenario also could be true.

These are diversified mutual funds which can invest in stocks across market capitalisation. As per regulatory mandate, these funds need to have a minimum investment in equity and equity related instruments of 65%.

A beginner’s guide to mutual funds – 7

Should new mutual fund investors pick up only aggressive hybrid schemes and tax saving schemes (ELSS) as their first investment. Many mutual fund advisors typically ask new investors to opt for aggressive hybrid schemes or equity linked saving schemes.

First, aggressive hybrid schemes are recommended by many mutual fund advisors because they believe the unique portfolio of mix of equity and debt makes these schemes relatively stable in times of adverse conditions in the market. As far as ELSSs (Equity Linked Saving Schemes) are concerned, many advisors say the mandatory lock-in period of three years help investors to get used to the ups and downs typically associated with equity investments.

Many mutual fund investors spread their investments across all major equity mutual fund categories in their quest to diversify the portfolio. It is very common to see a modest sum invested in large cap, mid cap, small cap, gold, and so on. Is this the right strategy to diversify the mutual fund portfolio?

Mutual fund advisors say investors should always keep in mind the basic objective of diversification. They point out that the basic idea behind diversification is to invest across asset classes to reduce the overall risk without compromising on the returns. However, when you are spreading your investments across many mutual fund categories and schemes without giving it a proper thought, it often doesn’t result in optimisation of resources or maximising wealth.

How do I choose a mutual fund scheme? Many mutual fund investors never tire of asking this question. Mutual fund advisors believe if investors stick to the basics and do not attempt to do something fanciful, they can easily choose the best schemes for them.

A beginner’s guide to mutual funds - 5

Here is the scoop: you should always remember that you are choosing mutual funds to achieve your financial goals. So, start with identifying your various financial goals. Next, find out how much time you have to achieve those goals. Finally, assess your risk taking ability.

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