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SEBI Investor Education Document

Different investment avenues are available to investors. Mutual fund also offers good investment opportunities to the investors. Like all investments, they also carry certain risks. The investors should compare the risks and expected yields after adjustment of tax on various instruments while taking decision on investment. The investors may seek advice from experts and consultants including agents and distributors of mutual funds schemes while making investment decisions.

In India mutual fund industry is still at a nascent stage and the investors are still to be informed about the Mutual Funds existence to them. With an objective to make the investors aware of the operations of mutual funds, an attempt has been made to provide information in the question and answer format which will help the investors in taking investment decisions on Mutual Funds.

FREQUENTLY ASKED QUESTIONS

  • What is a Mutual Fund?
    Mutual fund is a mechanism for pooling the resources by issuing units to the investors and investing funds in securities in accordance with objectives as disclosed in offer document. Investments in securities are spread across a wide cross-section of industries and sectors and thus the risk is reduced.

    Diversification reduces the risk because all stocks may not move in the same direction in the same proportion at the same time. Mutual fund issues units to the investors in accordance with quantum of money invested by them. Investors of mutual funds are known as unit holders.

    The profits or losses are shared by the investors in proportion to their investments. The mutual funds normally come out with a number of schemes with different investment objectives which are launched from time to time. A mutual fund is required to be registered with Securities and Exchange Board of India (SEBI) which regulates securities markets before it can collect funds from the public.
  • What is the history of Mutual Funds in India and role of SEBI in mutual funds industry?
  • How is a mutual fund set up?
  • What are the advantages of investing through a Mutual Fund.
  • What is Net Asset Value (NAV) of a scheme?
  • What is a procedure for an investment in a Mutual Fund.
  • What is a procedure to Repurchase / Redeem the units of a Mutual Fund.
  • What is a procedure to switch the units, can it be switch across different fund houses.
  • What is a Sale price
  • What is a Redemption / Repurchase price?
  • What are the risks involved in investing in a mutual fund.
  • What are the different types of mutual fund schemes?
  • What are sector specific funds/schemes?
  • What are Tax Saving Schemes?
  • What is a Fund of Funds (FoF) scheme?
  • What is a Load or no-load Fund?
  • Can a mutual fund impose fresh load or increase the load beyond the level mentioned in the offer documents?
  • What is an assured return scheme?
  • Can a mutual fund change the asset allocation while deploying funds of investors?
  • How to invest in a scheme of a mutual fund?
  • Can non-resident Indians (NRIs) can invest in mutual funds.
  • How much should one invest in debt or equity oriented schemes?
  • How to fill up the application form of a mutual fund scheme?
  • What should an investor look into an offer document?
  • When will the investor get certificate or statement of account after investing in a mutual fund?
  • How long will it take for transfer of units after purchase from stock markets in case of close-ended schemes?
  • As a unit holder, how much time will it take to receive dividends/repurchase proceeds?
  • Can a mutual fund change the nature of the scheme from the one specified in the offer document?
  • How will an investor come to know about the changes, if any, which may occur in the mutual fund?
  • How to know the performance of a mutual fund scheme?
  • How to know where the mutual fund scheme has invested money mobilised from the investors?
  • Is there any difference between investing in a mutual fund and in an initial public offering (IPO) of a company?
  • If schemes in the same category of different mutual funds are available, should one choose a scheme with lower NAV?
  • How to choose a scheme for investment from a number of schemes available?
  • Are the companies having names like mutual benefit the same as mutual funds schemes?
  • Is the higher net worth of the sponsor a guarantee for better returns?
  • Where can an investor look out for information on mutual funds?
  • Can an investor appoint a nominee for his investment in units of a mutual fund?
  • If mutual fund scheme is wound up, what happens to money invested?
  • How can the investors redress their complaints?
  • What is the procedure for registering a mutual fund with SEBI ?