1. What is the use of folio number in mutual funds?
A folio number is like a bank account number, it is unique number to identify your holdings with the respective mutual fund. The unique number differs from fund house to fund house.
2. Are returns from mutual funds guaranteed?
Generally, Mutual Funds do not offer guaranteed returns to investors. Although, SEBI regulations allow Mutual Funds to offer guaranteed returns subject to the Fund meeting certain conditions, most Funds do not offer such guarantees. In case of a guaranteed return scheme, the sponsor or the AMC, guarantees a minimum level of return and makes good the difference if the actual returns are less than the guaranteed minimum.
3. Can the NAV of a debt fund fall?
A debt fund invests in fixed-income instruments. These include Commercial Paper, Certificates of Deposit, debentures and bonds. While the rate of interest on these instruments stays the same throughout their tenure, their market value keeps changing, depending on how the interest rates in the economy move.
4. How are mutual funds different from Portfolio Management Schemes?
The investments made by the investors are pooled to form a common investible corpus and the gain/loss to all investors during a given period are same for all investors. In the case of portfolio management schemes, the investments of a particular investor remain identifiable to him. Here the gain or loss of investors will be different from each other.
5. Who is a custodian?
The custodian, an independent organisation, has the physical possession of all securities purchased by the mutual fund, and undertakes responsibility for its handling and safekeeping. For instance, SCHIL is the custodian for most fund houses in the country.
6. How relevant is the expense ratio?
As is evident from the definition, a lower expense ratio underlines the efficiency of a fund. This is need to apply to gauge the efficiency (or lack of it) between funds.
7. What is cheque-writing facility?
A service enabling investors to write cheques against their mutual fund account balances. Cheques usually must meet a certain minimum amount and the service is restricted to money-market funds.
8. Why should I consider investing in mutual funds?
Mutual funds are a vital tool to ensure your financial well-being. They help you to get better returns even from relatively smaller investment amounts, and are quite flexible in nature. Investment of a small amount at regular intervals or a big lump sum amount at once, you will find a mutual fund product suitable for your needs. With options like SIP (Systematic Investment Plan) and SWP (Systematic Withdrawal Plan), mutual funds can help you plan for short-term as well as long-term goals and financial liabilities.
9. When I receive or download a Scheme Information Document, what are the main things I should check for?
In your Scheme Information Document, watch out for the fund features, risk factors, initial issue expenses, recurring expenses, entry or exit loads, track record of the sponsors, educational qualification and professional experience of the key personnel managing your fund and the performance of other schemes launched by the mutual fund in the past. You should also check and be aware of pending litigations and penalties imposed, if any.
10. How will I know if my mutual fund makes changes to the scheme?
You will receive communication from the mutual fund in case of material changes to your scheme. Also, a quarterly newsletter, revised and updated mutual fund documents at least once in two years and addendums to the document in the interim period till the updated scheme documents are sent out, will let you keep track of any changes made to your mutual funds.