Mutual Funds Faq

8/13/2019 Mutual Funds Faq

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MUTUAL FUNDSFAQWhat 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 riss 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 ?

ONLINE MFTRANSACTIONS ON ICICIdirect+o ) need to allocate funds for investing in Mutual Funds?

Can ) modify "cancel my transactions?Will ) get an online confirmation of my transactions?Can ) transact anytime during the day?Can ) purchase after the time, which is displayed beside the scheme?)s there a minimum transaction amount for each scheme?Can ) use the funds allocated for investments in secondary maret towards investments in Mutual Fund ?

After my first purchase, can ) immediately enter another transaction?Who are the users of this facility and how?) do not have an account with )C)C) +irect, but would lie to invest in Mutual Funds* What do ) do?How do ) convert my e#isting portfolio of Mutual funds units into )C)C) +irects Mutual Fund portfolio?How do ) purchase from your web site?Can ) as an N-) buy Mutual Fund .nits in the &)N% account?When will ) be able to see my purchase details?How do ) redeem my Mutual Fund scheme units?

Will /+% be deducted on the redemption of units? )f yes what will be the basis of deduction of /+%Where can ) see the /+% deducted on the sale proceeds?How do ) switch from a particular scheme?How does the Automatic" %ystematic )nvestment &lan 0A)&" %)&1 wor?How does the Automatic" %ystematic Withdrawal &lan 0AW&"%W&1 wor?Will /+% be deducted on dividend received?)f ) change my address, what do ) need to do?

Can ) transact on a holiday?

What is a Mutual Fund?

A Mutual Fund is a body corporate that pools the savings of a number of investors and invests the same in avariety of different financial instruments, or securities* /he income earned through these investments and thecapital appreciation realised by the scheme are shared by its unit holders in proportion to the number of unitsowned by them* Mutual funds can thus be considered as financial intermediaries in the investment businesswho collect funds from the public and invest on behalf of the investors* /he losses and gains accrue to the
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investors only* /he )nvestment ob2ectives outlined by a Mutual Fund in its prospectus are binding on the MutualFund scheme* /he investment ob2ectives specify the class of securities a Mutual Fund can invest in* MutualFunds invest in various asset classes lie e3uity, bonds, debentures, commercial paper and governmentsecurities*

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What is an Asset Manageent C!"an#?

An Asset Management Company 0AMC1 is a highly regulated organisation that pools money from investors andinvests the same in a portfolio* /hey charge a small management fee, which is normally 4*5 per cent of thetotal funds managed*

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What is NA$?

NAV or Net Asset Value of the fund is the cumulative maret 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 sellinginto funds is done on the basis of NAV'related prices* NAV is calculated as follows7

NAV8 Maret value of the fund9s investments:-eceivables:Accrued )ncome; $iabilities'Accrued !#penses


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Funds that invest in e3uity shares are called e3uity funds* /hey carry the principal ob2ective of capitalappreciation of the investment over the medium to long'term* /he returns in such funds are volatile since theyare directly lined to the stoc marets* /hey are best suited for investors who are seeing capital appreciation*/here are different types of e3uity funds such as +iversified funds, %ector specific funds and )nde# basedfunds*Di)ersi'ied 'unds/hese funds invest in companies spread across sectors* /hese funds are generally meant for ris'taing

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* /hesefunds are targeted at investors who are e#tremely bullish about a particular sector*Inde1 'unds/hese funds invest in the same pattern as popular maret indices lie %& 5DD and 6%! )nde#* /he value ofthe 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 thisscheme are in the form of ta# rebates ."s EE as well saving in Capital >ains ."s 5!A and 5!6* /hey arebest suited for investors seeing ta# concessions*De(t / Inc!e Funds/hese Funds invest predominantly in high'rated fi#ed'income'bearing instruments lie bonds, debentures,government securities, commercial paper and other money maret instruments* /hey are best suited for themedium 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 maret instruments* /he period of investment could be as short as aday* /hey provide easy li3uidity* /hey have emerged as an alternative for savings and short'term fi#ed depositaccounts with comparatively higher returns* /hese funds are ideal for Corporates, institutional investors andbusiness houses who invest their funds for very short periods*0ilt Funds/hese funds invest in Central and %tate >overnment securities* %ince they are >overnment baced bondsthey give a secured return and also ensure safety of the principal amount* /hey are best suited for the mediumto 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* /heyprovide a steady return and reduce the volatility of the fund while providing some upside for capitalappreciation* /hey are ideal for medium' to long'term investors willing to tae moderate riss*%edge Funds/hese funds adopt highly speculative trading strategies* /hey hedge riss in order to increase the value of theportfolio*

+(, 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 redemptionthroughout the year* /heir prices are lined to the daily net asset value 0NAV1* From the investors perspective,they are much more li3uid than closed'ended funds* )nvestors are permitted to 2oin or withdraw from the fundafter 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 aswell as e#it* /hese funds have a fi#ed date of redemption* (ne of the characteristics of the close'endedschemes 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 wouldbe able to e#it from the fund at any time through the secondary maret*Inter)al 'unds/hese funds combine the features of both open;ended and close'ended funds wherein the fund is close'endedfor the first couple of years and open'ended thereafter* %ome funds allow fresh subscriptions and redemptionat fi#ed times every year 0say every si# months1 in order to reduce the administrative aspects of daily entry ore#it, yet providing reasonable li3uidity*

+c, On the (asis !' ge!gra"hic l!cati!n


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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 attractforeign capital for investment*

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What are the di''erent "lans that Mutual Funds !''er?0r!&th 4lan and Di)idend 4lan

A growth plan is a plan under a scheme wherein the returns from investments are reinvested and very fewincome distributions, if any, are made* /he investor thus only realises capital appreciation on the investment*/his plan appeals to investors in the high income bracet* .nder the dividend plan, income is distributed fromtime to time* /his plan is ideal to those investors re3uiring regular income*Di)idend Rein)estent 4lan+ividend plans of schemes carry an additional option for reinvestment of income distribution* /his is referred toas the dividend reinvestment plan* .nder this plan, dividends declared by a fund are reinvested on behalf ofthe investor, thus increasing the number of units held by the investors*Aut!atic In)estent 4lan.nder the Automatic )nvestment &lan 0A)&1 also called %ystematic )nvestment &lan 0%)&1, the investor is giventhe option for investing in a specified fre3uency of months in a specified scheme of the Mutual Fund for aconstant sum of investment* A)& allows the investors to plan their savings through a structured regular monthly

savings program*Aut!atic Withdra&al 4lan.nder the Automatic Withdrawal &lan 0AW&1 also called %ystematic Withdrawal &lan 0%W&1, a facility isprovided to the investor to withdraw a pre'determined amount from his fund at a pre'determined interval*

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What is Entr#/E1it L!ad?

A $oad is a charge, which the AMC may collect on entry and"or e#it from a fund* A load is levied to cover theup'front cost incurred by the AMC for selling the fund* )t also covers one time processing costs* %ome funds donot charge any entry or e#it load* /hese funds are referred to as No $oad Fund9* Funds usually charge anentry load ranging between 4*DDI and *DDI* !#it loads vary between D*5I and *DDI*For eg* $et us assume an investor invests -s* 4D,DDD"' and the current NAV is -s*4@"'* )f the entry load leviedis 4*DDI, the price at which the investor invests is -s*4@*4@ per unit* /he investor receives 4DDDD"4@*4@ 8JB4*B4B units* 0Note that units are allotted to an investor based on the amount invested and not on the basisof no* of units purchased1*

$et us now assume that the same investor decides to redeem his JB4*B4B units* $et us also assume that theNAV is -s 45"' and the e#it load is D*5DI* /herefore the redemption price per unit wors out to -s* 4*K5*/he investor therefore receives JB4*B4B # 4*K5 8 -s*44@BJ*4D

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What is Sales/4urchase "rice?

%ales"&urchase price is the price paid to purchase a unit of the fund* )f the fund has no entry load, then thesales price is the same as the NAV* )f the fund levies an entry load, then the sales price would be higher thanthe NAV to the e#tent of the entry load levied*

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What is rede"ti!n "rice?

-edemption price is the price received on selling units of open'ended scheme* )f the fund does not levy an e#itload, the redemption price will be same as the NAV* /he redemption price will be lower than the NAV in casethe fund levies an e#it load*

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What is re"urchase "rice?

-epurchase price is the price at which a close'ended scheme repurchases its units* -epurchase can either beat NAV or can have an e#it load*

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What is a S&itch?
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time horion you can select a particular scheme* 6esides all this, factors lie promoter9s image, ob2ective of thefund and returns given by the funds on different schemes should also be taen into account while selecting aparticular scheme*

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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 to4* -eceive .nit certificates or statements of accounts confirming your title within B wees from the date yourre3uest for a unit certificate is received by the Mutual Fund** -eceive information about the investment policies, investment ob2ectives, financial position and generalaffairs of the schemeG@* -eceive dividend within days of their declaration and receive the redemption or repurchase proceedswithin 4D days from the date of redemption or repurchase* /he trustees shall be bound to mae such disclosures to the unit holders as are essential in order to eepthem 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 tae up the matter with the concerned Mutual Funds andfollow up with them till they are resolved*

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It is )er# !'ten said that Mutual Funds ha)e "er'!red (adl#5 4lease e1"lain?/he performance of Mutual Funds is evaluated on the basis of absolute increase or decrease in its Net AssetValue 0NAV1* However a fund9s performance should be evaluated on the basis of a comparison with therelevant indices and alternative instruments* /he NAV varies from fund to fund* /herefore this argument is notentirely true* However some funds have performed poorly with their NAV 3uoting well below their original )&(price*

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Can I a)ail n!inati!n 'acilit# in Mutual Fund schees "urchased thr!ugh ICICIdirect5c! ?

Currently nomination facility is not available on )C)C)direct*com site*

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D! I need t! all!cate 'unds '!r in)esting in Mutual Funds?

es, 2ust as in the secondary maret, you will need to allocate funds for the purpose of investing in MutualFunds* .nder the Modify Allocation option you would have a separate section for allocating money for MutualFunds* Also the funds which are allocated for investments in Mutual Fund will not be allowed for transactions inthe secondary maret*

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Can I !di'# /cancel # transacti!ns?

es, while placing any mutual fund order, modify or cancel option would be available to you till the finalconfirmation of the order is placed by you* (nce you clic on Final Confirmation you cannot modify or cancelthe order placed by you* ou can only modify " cancel any %ystematic )nvestment &lan 0%)&1 " %ystematicWithdrawal &lan 0%W&1 order placed by you*

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Will I get an !nline c!n'irati!n !' # transacti!ns?

As soon as you confirm your order you can view the details of your transaction in the order boo* Also an emailwill be sent to your email address*

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Can I transact an#tie during the da#?

es, you can transact at any time of the day* However, in order to get the NAV of the current day you wouldhave to transact before the cut'off time of the scheme* )f you place any order after the said cut'off time, youwould be eligible for NAV of the ne#t day*

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Can I "urchase a'ter the tie &hich is dis"la#ed (eside the schee?

)n order to get the NAV of the same day, you can purchase up to the cut'off time of the scheme, after whichyou will get the ne#t days NAV* 0)f the ne#t day is a holiday, then the NAV of the ne#t woring day1*

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Is there a iniu transacti!n a!unt '!r each schee?

As decided by the fund, there is a minimum transaction amount indicated against each scheme* ou will get tosee the minimum transaction amount in the &lace (rder screen*

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Can I use the 'unds all!cated '!r in)estents in sec!ndar# ar*et t!&ards in)estents inMutual Fund ?

)n order to invest in Mutual Fund, you will need to separately allocate funds for the same* /his option isavailable to you in the Modify Allocation screen*

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A'ter # 'irst "urchase6 can I iediatel# enter an!ther transacti!n?

After your first purchase you will not be permitted to transact for a period of to J days depending on theprocessing time of the Mutual Funds -egistrar* After you place an investment order in any Mutual Fund for thefirst 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 youcan place any number of order in any schemes of the Mutual Fund*)n the case of Franlin /empleton MF and 6irla %un $ife MF, the Folio Number is generated for each schemeoffered by the MF* Hence the processing time would be for each scheme of the Mutual Fund* %uppose if youplace an order for a $i3uid Fund, then a folio number is generated for that scheme only and to place an orderfor the first time in a balanced fund you will have again wait till a new folio number is generated*

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Wh! are the users !' this 'acilit# and h!&?

All )C)C) +irect customers who are Non'resident )ndians, whose accounts are activated, can use the samelogin )d and password to invest in Mutual Funds*ou can invest in units of a Mutual fund from either the Non'&ins N-! or Non'&ins N-( account*

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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!?

ou can contact any )C)C) Centre to open accounts or fill in the application form on the web site and ourCustomer %ervice !#ecutive will visit you for opening your e'invest account* (nce the processing of your formis completed, you can start investing in Mutual Funds online*

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%!& d! I c!n)ert # e1isting "!rt'!li! !' Mutual Fund units t! ICICI Direct7s Mutual Fund"!rt'!li!?

A /ransfer'in re3uest form is available on the site* However this facility of /ransfer'in can be availed only ifyoure 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)directs MutualFund portfolio you should hold or should have held units in at least one scheme of the mutual fund subscribedthrough )C)C)direct*com* Fill in the e#isting folio number alloted for that scheme* /hereafter you need to tae a

printout of the form filled and forward it to )C)C)direct* )n case of transfer'in of dividend schemes the dividendre'investment option will by default be taen to be re'investment and will appear as OO* )n case the dividendre'investment option as per your records is dividend pay'out ONO, to change the dividend re'investment optionyou can use the modify dividend re'investment hyperlin*

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%!& d! I "urchase 'r! #!ur &e( site?

Clic on the lin O&lace (rder O in the MF /rading section* /his will tae you to all the schemes of the fund* /hedetails of the scheme are indicated against each scheme* %elect &.-CHA%! in the drop down menu and thenclic on >( to place your purchase order* ou can also select the option for dividend reinvestment through the
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purchase order screen*)n case you are an N-), first you need to decide is whether you want repatriation benefit or not* )f you wantrepatriation benefit, select the Non'&ins N-! account* %elect Non'&ins N-( account if you do not wantrepatriation benefit*

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Can I as an NRI (u# Mutual Fund Units in the 4INS acc!unt?

No, you cannot purchase mutual fund units in the &)N% account* ou can only do so in the Non'&ins account*

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When &ill I (e a(le t! see # "urchase details?

/he details of your transactions will be immediately updated in your order boo* An email will also be sent toyou and the entry in your portfolio will be displayed within /:@ days*

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%!& d! I redee # Mutual Fund schee units?

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 >( toplace your redemption re3uest* ou can either redeem a certain amount or specify the number of units held byyou* /here is a minimum transaction amount that is indicated against each scheme* A cut off time is alsodisplayed to get that days NAV* /he details of your transactions will be immediately updated in your orderboo, an email will be sent and your ban account will be credited after /:@ days 0the date of pay'out woulddiffer for scheme and will not necessarily be /:@ days1*

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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-)s, /+% will be deducted on the sale proceeds* /he /+% will deducted depending upon whetherit is a short'term capital gain or long term capital gains* For short term capital gain the ta# is deducted P @@Iwhile in case of long term capital gains it is deducted P 44I*

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Where can I see the TDS deducted !n the sale "r!ceeds?

/he /+% deducted for N-) can be seen by Clicing on the e#ecuted hyperlin against the transaction* ou willfind the complete details of the redemption including the /+% deducted*

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%!& d! I s&itch 'r! a "articular schee?

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 >( toplace your switch re3uest* Clic on the scheme you wish to %witch From* /here is a minimum transactionamount indicated against the scheme* Also the scheme you wish to O%witch /oO carries a minimum transactionamount* /herefore the amount which you will be switching will be higher of the two* /he details of yourtransactions will be immediately updated in your order boo, an email will be sent showing the O%witch FromOand O%witch /oO units* /he entry in your portfolio will be displayed within /:@ days* %ince this does not involveany transfer of funds, your ban account will not be affected*

%witch (ut is treated as redemption* Hence, in case of N-)s, /+% will be deducted on %witch out transactionalso* /he gross amount after deducting the /+% will be used for switch in /ransaction i*e* units worthe3uivalent to the net amount will be utilied to switching in into the desired scheme*

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%!& d!es the Aut!atic/ S#steatic In)estent 4lan +AI4/ SI4, &!r*?

%elect the option for O%ystematic &lansO* %elect the fund name and the scheme* A screen will appear with thedetails of that scheme similar to that in the &urchase screen* )n addition to these details you will have to fill upthe fre3uency with which the investments will be made and the start date* From the date specified a fi#edamount 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
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Documents

Mutual Funds Faq