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What is a Mutual Fund? What is an Asset Management Company? What is NAV? How often is the NAV declared? What are the benefits of investing in Mutual Funds? Are there any ris s involved in investing in Mutual Funds? What are the different types of Mutual funds? What are the different plans that Mutual Funds offer? What is !ntry"!#it $oad? What is %ales"&urchase price? What is redemption price? What is repurchase price? What is a %witch? What is %hut'(ut &eriod? )s there any minimum loc 'in period for my units? Who are the issuers of Mutual funds in )ndia? What are the factors that influence the performance of Mutual Funds? As a new investor how do ) select a particular scheme? What are the rights that are available to a Mutual Fund holder? )t is very often said that Mutual Funds have performed badly* &lease e#plain? Can ) avail nomination facility in Mutual Fund schemes purchased through )C)C)direct*com ?
investors only* /he )nvestment ob2ectives outlined by a Mutual Fund in its prospectus are binding on the Mutual Fund scheme* /he investment ob2ectives specify the class of securities a Mutual Fund can invest in* Mutual Funds invest in various asset classes li e e3uity, bonds, debentures, commercial paper and government securities* /op
What is NA$?
NAV or Net Asset Value of the fund is the cumulative mar et value of the assets of the fund net of its liabilities* NAV per unit is simply the net value of assets divided by the number of units outstanding* 6uying and selling into funds is done on the basis of NAV'related prices* NAV is calculated as follows7 NAV8 Mar et value of the fund9s investments:-eceivables:Accrued )ncome; $iabilities'Accrued !#penses <<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<< Number of (utstanding units /op
What are the di''erent t#"es !' Mutual 'unds? +a, On the (asis !' O(-ecti)e
E.uit# Funds/ 0r!&th Funds
Funds that invest in e3uity shares are called e3uity funds* /hey carry the principal ob2ective of capital appreciation of the investment over the medium to long'term* /he returns in such funds are volatile since they are directly lin ed to the stoc mar ets* /hey are best suited for investors who are see ing capital appreciation* /here are different types of e3uity funds such as +iversified funds, %ector specific funds and )nde# based funds* Di)ersi'ied 'unds /hese funds invest in companies spread across sectors* /hese funds are generally meant for ris 'ta ing investors who are not bullish about any particular sector* Sect!r 'unds /hese funds invest primarily in e3uity shares of companies in a particular business sector or industry* /hese funds are targeted at investors who are e#tremely bullish about a particular sector* Inde1 'unds /hese funds invest in the same pattern as popular mar et indices li e %C& 5DD and 6%! )nde#* /he value of the inde# fund varies in proportion to the benchmar inde#* Ta1 Sa)ing Funds /hese funds offer ta# benefits to investors under the )ncome /a# Act* (pportunities provided under this scheme are in the form of ta# rebates ."s EE as well saving in Capital >ains ."s 5A!A and 5A!6* /hey are best suited for investors see ing ta# concessions* De(t / Inc! e Funds /hese Funds invest predominantly in high'rated fi#ed'income'bearing instruments li e bonds, debentures, government securities, commercial paper and other money mar et instruments* /hey are best suited for the medium to long'term investors who are averse to ris and see capital preservation* /hey provide regular income and safety to the investor* Li.uid Funds / M!ne# Mar*et Funds /hese funds invest in highly li3uid money mar et instruments* /he period of investment could be as short as a day* /hey provide easy li3uidity* /hey have emerged as an alternative for savings and short'term fi#ed deposit accounts with comparatively higher returns* /hese funds are ideal for Corporates, institutional investors and business houses who invest their funds for very short periods* 0ilt Funds /hese funds invest in Central and %tate >overnment securities* %ince they are >overnment bac ed bonds they give a secured return and also ensure safety of the principal amount* /hey are best suited for the medium to long'term investors who are averse to ris * 2alanced Funds /hese funds invest both in e3uity shares and fi#ed'income'bearing instruments 0debt1 in some proportion* /hey provide a steady return and reduce the volatility of the fund while providing some upside for capital appreciation* /hey are ideal for medium' to long'term investors willing to ta e moderate ris s* %edge Funds /hese funds adopt highly speculative trading strategies* /hey hedge ris s in order to increase the value of the portfolio* +(, On the (asis !' Fle1i(ilit# O"en3ended Funds /hese funds do not have a fi#ed date of redemption* >enerally they are open for subscription and redemption throughout the year* /heir prices are lin ed to the daily net asset value 0NAV1* From the investorsF perspective, they are much more li3uid than closed'ended funds* )nvestors are permitted to 2oin or withdraw from the fund after an initial loc 'in period* Cl!se3ended Funds /hese funds are open initially for entry during the )nitial &ublic (ffering 0)&(1 and thereafter closed for entry as well as e#it* /hese funds have a fi#ed date of redemption* (ne of the characteristics of the close'ended schemes is that they are generally traded at a discount to NAVG but the discount narrows as maturity nears* /hese funds are open for subscription only once and can be redeemed only on the fi#ed date of redemption* /he units of these funds are listed 0with certain e#ceptions1, are tradable and the subscribers to the fund would be able to e#it from the fund at any time through the secondary mar et* Inter)al 'unds /hese funds combine the features of both open;ended and close'ended funds wherein the fund is close'ended for the first couple of years and open'ended thereafter* %ome funds allow fresh subscriptions and redemption at fi#ed times every year 0say every si# months1 in order to reduce the administrative aspects of daily entry or e#it, yet providing reasonable li3uidity* +c, On the (asis !' ge!gra"hic l!cati!n
D! estic 'unds /hese funds mobilise the savings of nationals within the country* O''sh!re Funds /hese funds facilitate cross border fund flow* /hey invest in securities of foreign companies* /hey attract foreign capital for investment* /op
What is a S&itch?
%ome Mutual Funds provide the investor with an option to shift his investment from one scheme to another within that fund* For this option the fund may levy a switching fee* %witching allows the )nvestor to alter the allocation of their investment among the schemes in order to meet their changed investment needs, ris profiles or changing circumstances during their lifetime* /op
Is there an#
ini u
# units?
/here is no loc 'in period in the case of open'ended funds* However in the case of ta# saving funds a minimum loc 'in period is applicable* /he loc 'in period for different ta# saving schemes are as follows7
secti!n
."s EE ."s 5A!A ."s 5A!6
ini u
@ yrs* @ yrs* J yrs*
l!c*3in "eri!d
/op
What are the 'act!rs that in'luence the "er'!r ance !' Mutual Funds?
/he performances of Mutual funds are influenced by the performance of the stoc mar et as well as the economy as a whole* !3uity Funds are influenced to a large e#tent by the stoc mar et* /he stoc mar et in turn is influenced by the performance of the companies as well as the economy as a whole* /he performance of the sector funds depends to a large e#tent on the companies within that sector* 6ond'funds are influenced by interest rates and credit 3uality* As interest rates rise, bond prices fall, and vice versa* %imilarly, bond funds with higher credit ratings are less influenced by changes in the economy* /op
time horiMon you can select a particular scheme* 6esides all this, factors li e promoter9s image, ob2ective of the fund and returns given by the funds on different schemes should also be ta en into account while selecting a particular scheme* /op
What are the rights that are a)aila(le t! a Mutual Fund h!lder?
As per %!6) -egulations on Mutual Funds, an investor is entitled to 4* -eceive .nit certificates or statements of accounts confirming your title within B wee s from the date your re3uest for a unit certificate is received by the Mutual Fund* ?* -eceive information about the investment policies, investment ob2ectives, financial position and general affairs of the schemeG @* -eceive dividend within A? days of their declaration and receive the redemption or repurchase proceeds within 4D days from the date of redemption or repurchase A* /he trustees shall be bound to ma e such disclosures to the unit holders as are essential in order to eep them informed about any information which may have an adverse bearing on their investments* 5* J5I of the unit holders with the prior approval of %!6) can terminate the AMC of the fund* B* J5I of the unit holders can pass a resolution to wind'up the scheme* J* An investor can send complaints to %!6), who will ta e up the matter with the concerned Mutual Funds and follow up with them till they are resolved* /op
It is )er# !'ten said that Mutual Funds ha)e "er'!r ed (adl#5 4lease e1"lain?
/he performance of Mutual Funds is evaluated on the basis of absolute increase or decrease in its Net Asset Value 0NAV1* However a fund9s performance should be evaluated on the basis of a comparison with the relevant indices and alternative instruments* /he NAV varies from fund to fund* /herefore this argument is not entirely true* However some funds have performed poorly with their NAV 3uoting well below their original )&( price*
/op Can I a)ail n! inati!n 'acilit# in Mutual Fund sche es "urchased thr!ugh ICICIdirect5c!
Currently nomination facility is not available on )C)C)direct*com site*
? /op
Can I
!di'# /cancel
# transacti!ns?
Nes, while placing any mutual fund order, modify or cancel option would be available to you till the final confirmation of the order is placed by you* (nce you clic on Final Confirmation you cannot modify or cancel the order placed by you* Nou can only modify " cancel any %ystematic )nvestment &lan 0%)&1 " %ystematic Withdrawal &lan 0%W&1 order placed by you* /op
# transacti!ns?
As soon as you confirm your order you can view the details of your transaction in the order boo * Also an email will be sent to your email address* /op
Is there a
ini u
As decided by the fund, there is a minimum transaction amount indicated against each scheme* Nou will get to see the minimum transaction amount in the &lace (rder screen* /op
Can I use the 'unds all!cated '!r in)est ents in sec!ndar# Mutual Fund ?
)n order to invest in Mutual Fund, you will need to separately allocate funds for the same* /his option is available to you in the Modify Allocation screen* /op
A'ter
After your first purchase you will not be permitted to transact for a period of A to J days depending on the processing time of the Mutual FundsF -egistrar* After you place an investment order in any Mutual Fund for the first time a Folio Number is generated for that particular fund* .ntil the Folio number is generated you will not be allowed to place any further orders for that particular Mutual Fund* After the Folio Number is generated you can place any number of order in any schemes of the Mutual Fund* )n the case of Fran lin /empleton MF and 6irla %un $ife MF, the Folio Number is generated for each scheme offered by the MF* Hence the processing time would be for each scheme of the Mutual Fund* %uppose if you place an order for a $i3uid Fund, then a folio number is generated for that scheme only and to place an order for the first time in a balanced fund you will have again wait till a new folio number is generated* /op
I d! n!t ha)e an acc!unt &ith ICICI Direct6 (ut &!uld li*e t! in)est in Mutual Funds5 What d! I d!?
Nou can contact any )C)C) Centre to open accounts or fill in the application form on the web site and our Customer %ervice !#ecutive will visit you for opening your e'invest account* (nce the processing of your form is completed, you can start investing in Mutual Funds online* /op
# e1isting "!rt'!li! !' Mutual Fund units t! ICICI Direct7s Mutual Fund
A /ransfer'in re3uest form is available on the site* However this facility of /ransfer'in can be availed only if youFre a sole holder in the physical units else your re3uest will be re2ected* /his can be accessed through the &lace order hyperlin * However to convert your e#isting portfolio of Mutual Fund units to )C)C)directFs Mutual Fund portfolio you should hold or should have held units in at least one scheme of the mutual fund subscribed through )C)C)direct*com* Fill in the e#isting folio number alloted for that scheme* /hereafter you need to ta e a printout of the form filled and forward it to )C)C)direct* )n case of transfer'in of dividend schemes the dividend re'investment option will by default be ta en to be re'investment and will appear as ONO* )n case the dividend re'investment option as per your records is dividend pay'out ONO, to change the dividend re'investment option you can use the modify dividend re'investment hyperlin * /op
Clic on the lin O&lace (rder O in the MF /rading section* /his will ta e you to all the schemes of the fund* /he details of the scheme are indicated against each scheme* %elect &.-CHA%! in the drop down menu and then clic on >( to place your purchase order* Nou can also select the option for dividend reinvestment through the
purchase order screen* )n case you are an N-), first you need to decide is whether you want repatriation benefit or not* )f you want repatriation benefit, select the Non'&ins N-! account* %elect Non'&ins N-( account if you do not want repatriation benefit* /op
# "urchase details?
/he details of your transactions will be immediately updated in your order boo * An email will also be sent to you and the entry in your portfolio will be displayed within /:@ days* /op
%!& d! I redee
Clic on the lin O&lace (rderO in the MF /rading section* /his will display all the scheme units held by you, with details against each scheme* %elect the -!+!!M option in the drop down menu and then clic on >( to place your redemption re3uest* Nou can either redeem a certain amount or specify the number of units held by you* /here is a minimum transaction amount that is indicated against each scheme* A cut off time is also displayed to get that dayFs NAV* /he details of your transactions will be immediately updated in your order boo , an email will be sent and your ban account will be credited after /:@ days 0the date of pay'out would differ for scheme and will not necessarily be /:@ days1* /op
Will TDS (e deducted !n the rede "ti!n !' units? I' #es &hat &ill (e the (asis !' deducti!n !' TDS
/+% is not deducted on the sale proceeds for -esident )ndians* )n case of N-)Fs, /+% will be deducted on the sale proceeds* /he /+% will deducted depending upon whether it is a short'term capital gain or long term capital gains* For short term capital gain the ta# is deducted P @@I while in case of long term capital gains it is deducted P 44I* /op
a "articular sche e?
Clic on the lin O&lace (rderO in the MF /rading section* /his will display all the scheme units held by you, with details against each scheme* %elect the %W)/CH option in the drop down menu and then clic on >( to place your switch re3uest* Clic on the scheme you wish to %witch From* /here is a minimum transaction amount indicated against the scheme* Also the scheme you wish to O%witch /oO carries a minimum transaction amount* /herefore the amount which you will be switching will be higher of the two* /he details of your transactions will be immediately updated in your order boo , an email will be sent showing the O%witch FromO and O%witch /oO units* /he entry in your portfolio will be displayed within /:@ days* %ince this does not involve any transfer of funds, your ban account will not be affected* %witch (ut is treated as redemption* Hence, in case of N-)Fs, /+% will be deducted on %witch out transaction also* /he gross amount after deducting the /+% will be used for switch in /ransaction i*e* units worth e3uivalent to the net amount will be utiliMed to switching in into the desired scheme* /op
%!& d!es the Aut! atic/ S#ste atic In)est ent 4lan +AI4/ SI4, &!r*?
%elect the option for O%ystematic &lansO* %elect the fund name and the scheme* A screen will appear with the details of that scheme similar to that in the &urchase screen* )n addition to these details you will have to fill up the fre3uency with which the investments will be made and the start date* From the date specified a fi#ed amount will be debited to your ban account* Lindly ensure that ade3uate clear funds are available for the %)& to be effective* An email will be sent showing the details of the amount invested and the entry in your portfolio
will be displayed within /:@ days* Nou can however enter into only one plan per scheme* )n case if you do not sufficient funds in your net withdrawal balance for a month, then the %)& would be re2ected for that particular month* /op
%!& d!es the Aut! atic/ S#ste atic Withdra&al 4lan +AW4/SW4, &!r*?
%elect the option for O%ystematic Withdrawal &lanO* %elect the fund name and the scheme* A screen will appear with the details of that scheme similar to that in the -edemption screen* )n addition to these details you will have to fill up the fre3uency with which the withdrawals will be made and the start date* From the date specified a fi#ed amount will be credited to your ban account* An email will be sent showing the details of the amount withdrawn and the entry in your portfolio will be displayed within /:@ days* Nou can however enter into only one plan per scheme* However if a %W&QAW& re3uest is re2ected for insufficient units, then the entire &lan will be scraped automatically* Nou will also receive an e'mail indicating that the plan has been scrapped* /op
I' I change
For change of address, you will have to send a letter to us with both the old and new address mentioned in it* All the co'holders should sign this letter* )t can be sent by post or fa#ed to us* /op