FAQs
1. Can a mutual fund impose fresh load or increase the load beyond the level
mentioned in the offer documents?
Mutual funds cannot increase the load beyond the level mentioned in the offer document.
Any change in the load will be applicable only to prospective investments and not to the
original investments. In case of imposition of fresh loads or increase in existing loads, the
mutual funds are required to amend their offer documents so that the new investors are
aware of loads at the time of investments.
2. What is a sale or repurchase/redemption price?
The price or NAV a unit holder is charged while investing in an open-ended scheme is
called sales price. It may include sales load, if applicable.
Repurchase or redemption price is the price or NAV at which an open-ended scheme
purchases or redeems its units from the unit holders. It may include exit load, if
applicable.
3. Can a mutual fund change the asset allocation while deploying funds of investors?
Considering the market trends, fund managers are allowed flexibility in altering the asset
allocation i.e. he can invest higher or lower percentage of the fund in equity or debt
instruments with respect to the limits prescribed in the offer document.
Fund managers resort to alteration in the asset allocation based on market movements,
in order to protect the NAV. However, they do so keeping in mind the best interest of the
investors. In case the mutual fund wants to change the asset allocation on a permanent
basis, they are required to inform the unit holders and giving them option to exit the
scheme at prevailing NAV without any load.
4. Can non-resident Indians (NRIs) invest in mutual funds?
Yes, non-resident Indians can also invest in mutual funds. Necessary details in this
respect are given in the offer documents of the respective schemes.
5. Is there a guaranteed return on the mutual funds?
No, mutual fund returns are not guaranteed. They depend on market movements and are
subject to risks.
6. Are mutual funds insured?
No. Mutual fund units are neither insured nor can be insured. Mutual Fund investments
are subject to market risks and therefore provide no such guarantee or mitigation
unforeseen circumstances. However, because mutual fund investments are more risky
than insured investments, they generally offer potential for higher long-term returns.
7. When is the right time to invest in equities?
There is no right time to invest in equities as the markets are prone to constant
fluctuation. Thus, one should not predict or try to time the markets before investing.
However, it is recommended that one should stay invested in the equity markets for the
long term in order to ride market ups and downs and build wealth in the long term.
8. What do I get as proof of my holdings?
The fund house issues an "account statement" similar to a bank passbook. The account
statement is a non-transferable document which shows details of all purchases and sales,
along with the price at which the purchase or sale was made. It also shows the amount
invested and redeemed to date and the number of units held.
Post every transaction, a fresh account statement is issued reflecting the updated
holdings of the unit holder. Usually, the account statement is sent to the investor within 3
working days of the receipt of the purchase/redemption request by the investor.
9. Can I follow my investments in the daily paper?
Yes. Most mutual funds and publicly traded stocks are listed in the business section of
your local newspaper or in financial publications such as the Economic Times.
10. Will I have a switching facility between funds?
Unit holders will have an option to switch all or part of their investment from one fund to
another which is available for investment at that time. To process a switch, a unit holder
must provide clear instructions by completing a form and submitting it at the Investor
Service Centres or the office of the Registrar and Transfer Agent on any business day.
Post any change with respect to purchase or redemption, an account statement reflecting
the new holdings will be sent to the unit holder within 3 days of completion of the
transaction.
11. How will an investor come to know about the changes, if any, which may occur in
the mutual fund?
Any change that a fund house makes has to be communicated to its investors. The
mutual funds are required to inform any material changes to their unit holders. The offer
document of a mutual fund is also required to be revised and updated at least once in two
years. However, any intermediate material changes are communicated to investors by
way of an addendum to the offer document till it is revised and reprinted.
12. How to know the performance of a mutual fund scheme?
The performance of a scheme is reflected in its net asset value (NAV) which is disclosed
on daily basis in case of open-ended schemes and on weekly basis in case of closeended schemes. The NAV of a mutual fund scheme is required to be published in
newspapers and is also available on the web sites of fund houses. The NAV of mutual
fund schemes are also available on the web site of Association of Mutual Funds in India.
Fund houses publish their performance in the form of half-yearly results which include
their returns/yields over a period of time i.e. last six months, 1 year, 3 years, 5 years and
since inception of schemes. At the end of the financial year, fund houses are also
required to send annual report or abridged annual report to their unit holders.
Apart from these, many research agencies also publish research reports on performance
of several mutual funds and comparison with other mutual funds including the ranking of
various schemes in terms of their performance.
13. How can one know where the mutual fund scheme has invested money mobilised
from the investors?
The mutual funds are required to disclose full portfolios of all of their schemes on halfyearly basis which are published in the newspapers and also sent to the unit holders. The
scheme portfolio shows investment made in each security i.e. equity, debentures, money
market instruments, government securities, etc. and their quantity, market value and % to
NAV. These portfolio statements also required to disclose illiquid securities in the
portfolio, investment made in rated and unrated debt securities, non-performing assets
(NPAs), etc.
14. How to choose a scheme for investment from a number of schemes available?
Before making any investment in a mutual fund, investors must read the offer document very
carefully. They could also look into the track record of performance of the scheme but
however, that doesn't similar future performance. They may also compare the performance
with other schemes having similar investment objectives.
For debt oriented schemes, investors should consider the quality of debt instrument which
can be gauged from their rating. In equity oriented schemes, investors could look at the
quality of the portfolio. For qualified advice on investment, investors should consult their
financial advisers.
15. Is the higher net worth of the sponsor a guarantee for better returns?
The offer document of a mutual fund scheme shows the financial performance including
the net worth of the sponsor for a period of three years, so that the investor is aware of
the track record of the company which has sponsored the mutual fund. However, higher
net worth of the sponsor does not mean that the scheme would give better returns or any
other sort of compensation in case of loss.
16. Can an investor appoint a nominee for his investment in units of a mutual fund?
Yes. The nomination can be made by individuals applying for / holding units on their own,
singly or jointly. Non-individuals including society, trust, body corporate, partnership firm,
Karta of Hindu Undivided Family, holder of Power of Attorney cannot nominate.
17. If mutual fund scheme is wound up, what happens to money invested?
In case of winding up of a scheme, the mutual funds pay a sum based on prevailing NAV
after adjustment of expenses. Unit holders are entitled to receive a report on winding up
from the mutual funds which gives all necessary details.
18. How can the investors redress their complaints?
For queries, concerns and complaints, investors can either approach the concerned
Mutual Fund or their Investor Service Centres. Usually the offer document of the scheme
contains, the name of a contact person whom they may approach in case of any query,
complaints or grievances.
If the complaints remain unresolved, the investors may approach SEBI for facilitating the
redressal of their complaints. SEBI would then take the matter up with the concerned
mutual fund and follows up with it regularly. The address to send the complaints to is :
Securities and Exchange Board of India
Office of Investor Assistance and Education (OIAE)
Plot No.C4-A , "G" Block, 1st Floor,
Bandra-Kurla Complex,
Bandra (E), Mumbai - 400 051.
Phone: 26449199-88-77
19. Can NRIs invest in Mutual Funds?
Non Resident Indians (NRI) and Foreign Institutional Investors (FIIs) have been granted
special permission by the RBI under Schedule 5 of the Foreign Exchange Management
Regulations, 2000 for investing in/redeeming units of mutual funds subject to certain
conditions.