A mutual fund is an investment, which is operated by an investment company that raises money from shareholders and invests it in stocks, bonds, options, commodities, or money market securities. These funds offer investors the advantages of diversification and professional management.

As a rule, Investors should read the mutual fund prospectus clearly before investing. The reason being, the prospectus clearly defines a fund's investment objective, the investment style of the manager and the types of securities in which the fund will invest.

The fund's value keeps fluctuating from day to day. The NAVs of the funds don’t remain constant. The value of a fund's units i.e. NAVs are updated on a daily basis and are available on the AMC’s website.

Many factors like change in interest rates, economic trends influence the performance of a mutual fund. When you purchase units in a mutual fund, you agree to pay certain fees and expenses in the form of entry and exit load.

1. Schemes according to Maturity Period:
   • Open-ended Fund/ Scheme: An open-ended fund or scheme is one that is available for subscription and repurchase on a continuous basis.
   • Close-ended Fund/ Scheme: A close-ended fund or scheme has a fixed maturity period. The fund is open for subscription only during a specified period at the time of launch of the scheme. During this period, investors can invest in the scheme at the time of the initial public issue. When the fund date closes, the investor can buy or sell the units of the scheme on the stock exchanges where the units are listed. Some close-ended funds give an option of selling back the units to the mutual fund through periodic repurchase at NAV related prices, which serves as exit route.
     
2. Schemes according to Investment Objective:
   A scheme can also be classified as growth, income or balanced scheme considering its investment objective. Such schemes may be open-ended or close-ended schemes as described earlier. Such schemes may be classified mainly as follows:
   • Growth / Equity Oriented Scheme: The aim of growth funds is to provide capital appreciation over the medium to long- term. Such schemes normally invest a major part of their corpus in equities, which comparatively have high risks. These schemes provide options like dividend, capital appreciation, etc. and the investors can choose an option depending on their preferences. The investors must indicate the option in the application form. The mutual funds also allow the investors to change the options at a later date. Growth schemes are good for investors having a long-term outlook seeking appreciation over a period of time.
   • Income / Debt Oriented Scheme: The aim of income funds is to provide regular and steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures, government securities and money market instruments. Such funds are less risky compared to equity schemes. These funds are not affected because of fluctuations in equity markets. However, opportunities of capital appreciation are also limited in such funds. The NAVs of such funds are affected because of change in interest rates in the country. If the interest rates fall, NAVs of such funds are likely to increase in the short run and vice versa. However, long-term investors may not bother about these fluctuations.
   • Balanced Fund: The aim of balanced funds is to provide both growth and regular income as such schemes invest both in equities and fixed income securities in the proportion indicated in their offer documents. These are appropriate for investors looking for moderate growth. They generally invest 40-60% in equity and debt instruments. These funds are also affected because of fluctuations in share prices in the stock markets. However, NAVs of such funds are likely to be less volatile compared to pure equity funds.
   • Money Market or Liquid Fund: These funds are also income funds and their aim is to provide easy liquidity, preservation of capital and moderate income. These schemes invest exclusively in safer short-term instruments such as treasury bills, certificates of deposit, commercial paper and inter-bank call money, government securities, etc. Returns on these schemes fluctuate much less compared to other funds. These funds are appropriate for corporate and individual investors as a means to park their surplus funds for short periods.
   • Gilt Fund: These funds invest exclusively in government securities. Government securities have no default risk. NAVs of these schemes also fluctuate due to change in interest rates and other economic factors like income or debt oriented schemes.
   • Index Funds: Index Funds replicate the portfolio of a particular index such as the BSE Sensitive index, S&P NSE 50 index (Nifty), etc. These schemes invest in the securities in the same proportion comprising of an index. NAVs of such schemes would rise or fall in accordance with the rise or fall in the index, though not exactly by the same percentage due to some factors known as ‘tracking error’ in technical terms. Necessary disclosures in this regard are made in the offer document of the mutual fund scheme.
     There are also exchange traded index funds launched by the mutual funds, which are traded on the stock exchanges.
   • Sector specific funds/schemes: Sector funds are those funds, which invest in the securities of only those sectors or industries as, specified in the offer documents e.g. Pharmaceuticals, Software, Fast Moving Consumer Goods (FMCG), Petroleum stocks, etc. The returns in these funds are dependent on the performance of the respective sectors/industries. While these funds may give higher returns, they are more risky compared to diversified funds. Investors need to keep a watch on the performance of those sectors/industries and must exit at an appropriate time. They may also seek advice of an expert.
   • Tax Saving Schemes: These schemes offer tax rebates to the investors under specific provisions of the Income Tax Act, 1961 as the Government offers tax incentives for investment in specified avenues e.g. Equity Linked Savings Schemes (ELSS). Pension schemes launched by the mutual funds also offer tax benefits. These schemes are growth oriented and invest pre-dominantly in equities. The growth opportunities and risks involved are somewhat similar to an equity-oriented scheme.

Investments by NRIs in Mutual Funds can be made on a repatriable or on a non-repatriable basis, as preferred by the investor

1. Repatriable Basis: To invest on a repatriable basis, you must have an NRE or FCNR Bank Account in India. The Reserve Bank of India (RBI) has granted a general permission to Mutual Funds to offer mutual fund schemes on repatriation basis, subject to the following conditions:
   • The mutual fund should comply with the terms and conditions stipulated by SEBI.
   • The amount representing investment should be received by inward remittance through normal banking channels, or by debit to an NRE / FCNR account of the non-resident investor.
   • The net amount representing the dividend / interest and maturity proceeds of units may be remitted through normal banking channels or credited to NRE / FCNR account of the investor, as desired by him subject to payment of applicable tax.
     
2. Non-Repatriable Basis: The Reserve Bank of India (RBI) has granted a general permission to Mutual Funds to offer mutual fund schemes on non-repatriation basis, subject to the following conditions:
   • Funds for investment should be provided by debit to NRO account of the NRI investor. Alternatively, funds may be invested by inward remittance or by debit to NRE / FCNR Account.
   • The current income in the form of dividends is allowed to be repatriated.

   No permission of Reserve Bank either by the Mutual Fund or the NRI investor is necessary.

Investment in Mutual Fund are subject to market risks. The following risks are mentioned below:

• Mutual funds and securities are subject to market risks and there is no assurance and no guarantee that the objectives of the mutual fund will be achieved.
• The NAV of the units issued under the scheme may go up or down depending on the factors and forces affecting capital markets.
• Past performance of the Sponsor/AMC/Mutual fund does not indicate the future performance of the schemes of the Mutual Fund.
• Investors in the scheme are not guaranteed of any assured /guaranteed returns.

The procedures for availing a PAN are quite simple but, for NRIs not having their own residences and / or residential proofs can be a bit discomforting. Hence, before the procedure of acquiring a PAN becomes rigid, NRI can choose an easier alternate by providing proof of residence of his representative assessee.
Such representative assessee can be resident parents, brothers, close relatives or even friends. Details regarding PAN are mentioned herein. An NRI can avail a PAN by making an application to the Income Tax office or Office of Unit Trust of India. An NRI is required to submit the following:

• Copy of passport
• Photograph
• Copy of Visa in case of an Indian citizen
• Details and photograph of representative assessee i.e. say, parents or brothers or even a friend's details and
• Proof of residence of representative assessee being any one of the documents be that telephone bill, electricity bill, ration card, bank statement or driving licence, showing the address of representative assessee

The benefits are enumerated below:

• A safe and convenient way to hold securities
• Immediate transfer of securities
• No stamp duty on transfer of securities
• Elimination of risks associated with physical certificates such as bad delivery, fake securities, delays, thefts etc.
• Reduction in paperwork involved in transfer of securities
• Reduction in transaction cost
• No odd lot problem, even one share can be sold
• Nomination facility
• Change in address recorded with DP gets registered with all companies in which investor holds securities electronically eliminating the need to correspond with each of them separately
• Transmission of securities is done by DP eliminating correspondence with companies
• Automatic credits into demat account of shares, arising out of bonus/split/consolidation/merger etc.
• Holding investments in equity and debt instruments in a single account.

First an investor has to approach a DP and fill up an account opening form. The account opening form must be supported by copies of any one of the approved documents to serve as proof of identity (POI) and proof of address (POA) as specified by SEBI. Besides, production of PAN card in original at the time of opening of account has been made mandatory effective from April 01, 2006.

All applicants should carry original documents for verification by an authorized official of the depository participant, under his signature. Further, the investor has to sign an agreement with DP in a depository prescribed standard format, which details rights and duties of investor and DP. DP should provide the investor with a copy of the agreement and schedule of charges for their future reference. The DP will open the account in the system and give an account number, which is also called BO ID (Beneficiary Owner Identification number).

The DP may revise the charges by giving 30 days notice in advance. SEBI has rationalised the cost structure for dematerialisation by removing account-opening charges, transaction charges for credit of securities, and custody charges vide circular dated January 28, 2005.

Further, SEBI has vide circular dated November 09, 2005 advised that with effect from January 09, 2006, no charges shall be levied by a depository on DP and consequently, by a DP on a Beneficiary Owner (BO) when a BO transfers all the securities lying in his account to another branch of the same DP or to another DP of the same depository or another depository, provided the BO Account/s at transferee DP and at transferor DP are one and the same, i.e. identical in all respects. In case the BO Account at transferor DP is a joint account, the BO Account at transferee DP should also be a joint account in the same sequence of ownership.

SEBI vide Circular No. MRD/DoP/Dep/Cir-22 /05 dated November 09, 2005 advised that with effect from January 09, 2006, no charges shall be levied by a depository on DP and consequently, by a DP on a Beneficiary Owner (BO) when a BO transfers all the securities lying in his account to another branch of the same DP or to another DP of the same depository or another depository, provided the BO Account/s at transferee DP and at transferor DP are one and the same, i.e. identical in all respects. In case the BO Account at transferor DP is a joint account, the BO Account at transferee DP should also be a joint account in the same sequence of ownership.

All other transfer of securities consequent to closure of account, not fulfilling the above-stated criteria, would be treated like any other transaction and charged as per the schedule of charges agreed upon between the BO and the DP.

In order to dematerialise physical securities one has to fill in a DRF (Demat Request Form), which is available with the DP, and submit the same along with physical certificates one wishes to dematerialise. Separate DRF has to be filled for each ISIN Number. The complete process of dematerialisation is outlined below:

• Surrender certificates for dematerialisation to your depository participant.
• Depository participant intimates Depository of the request through the system.
• Depository participant submits the certificates to the registrar of the Issuer Company.
  
  Registrar confirms the dematerialisation request from depository.
• After dematerialising the certificates, Registrar updates accounts and informs depository of the completion of dematerialisation.
• Depository updates its accounts and informs the depository participant.
• Depository participant updates the demat account of the investor.

Yes. The process is called rematerialisation. If one wishes to get back his securities in the physical form one has to fill in the RRF (Remat Request Form) and request his DP for rematerialisation of the balances in his securities account. The process of rematerialisation is outlined below:

• One makes a request for rematerialisation.
• Depository participant intimates depository of the request through the system.
• Depository confirms rematerialisation request to the registrar.
• Registrar updates accounts and prints certificates.
• Depository updates accounts and downloads details to depository participant.
• Registrar dispatches certificates to investor.

• The broker will receive the securities in his account on the payout day
• The broker will give instruction to its DP to debit his account and credit investor's account
• Investor will give ‘Receipt Instruction to DP for receiving credit by filling appropriate form. However, one can give standing instruction for credit into one’s account that will obviate the need of giving Receipt Instruction every time.

The investor will give delivery instruction to DP to debit his account and credit the broker’s account. Such instruction should reach the DP’s office at least 24 hours before the pay-in, as other wise DP will accept the instruction only at the investor’s risk.

In a bank account, credit to the account is given only when a 'pay-in' slip is submitted together with cash/cheque. Similarly, in a depository account 'Receipt in' form has to be submitted to receive securities in the account. However, for the convenience of investors, facility of 'standing instruction' is given. If you say 'Yes' for standing instruction, you need not submit 'Receipt in' slip every time you buy securities. If you are particular that securities can be credited to your account only with your consent, then do not say 'yes' (or tick) to standing instruction in the application form.

To give the delivery one has to fill a form called Delivery Instruction Slip (DIS). DIS may be compared to chequebook of a bank account. The following precautions are to be taken in respect of DIS:

• Ensure and insist with DP to issue DIS book
• Ensure that DIS numbers are pre-printed and DP takes acknowledgment for the DIS booklet issued to investor
• Ensure that your account number [client id] is pre-stamped.
• If the account is a joint account, all the joint holders have to sign the instruction slips. Instruction cannot be executed if all joint holders have not signed.
• Avoid using loose slips
• Do not leave signed blank DIS with anyone viz., broker/sub-broker. Keep the DIS book under lock and key when not in use
• If only one entry is made in the DIS book, strike out remaining space to prevent misuse by any one
• Investor should personally fill in target account -id and all details in the DIS

Yes. Both NSDL and CDSL have launched this facility for delivering instructions to your DP over Internet, called SPEED-e and EASI respectively. All registered users can use the facility after paying the applicable charges.

Yes, it is possible to get securities allotted to in Public Offerings directly in the electronic form. In the public issue application form there is a provision to indicate the manner in which an investor wants the securities allotted. He has to mention the BO ID and the name and ID of the DP on the application form. Any allotment made will be credited into the BO account.

The concerned company obtains the details of beneficiary holders and their holdings as on the date of the book closure / record date from Depositories. The payment to the investors will be made by the company through the Electronic Clearing Service (ECS) facility, wherever available. Thus the dividend / interest will be credited to your bank account directly. Where ECS facility is not available dividend / interest will be given by issuing warrants on which your bank account details are printed. The bank account details will be those, which you would have mentioned in your account opening, form or changed thereafter.

The concerned company obtains the details of beneficiary holders and their holdings as on the date of the book closure/record date from depositories. The company directly into the BO account will credit the entitlement.

In case of discrepancies in corporate benefits, one can approach the company/its R&T Agent.

Yes. In fact, pledging dematerialised securities is easier and more advantageous as compared to pledging physical securities.

The procedure to pledge electronic securities is as follows:

• Both investor (pledger) as well as the lender (pledgee) must have depository accounts with the same depository
• Investor has to initiate the pledge by submitting to DP the details of the securities to be pledged in a standard format
• The pledgee has to confirm the request through his/her DP
• Once this is done, securities are pledged.
• All financial transactions between the pledger and the pledgee are handled as per usual practice outside the depository system.

After one has repaid the loan, one can request for a closure of pledge by instructing the DP in a prescribed format. The pledgee on receiving the repayment will instruct his DP accordingly for the closure of the pledge.

Yes, if the pledgee (lender) agrees, one may change the securities offered in a pledge.

The securities pledged are only blocked in the account of pledger in favour of the pledgee. The pledger would continue to receive all the corporate benefits.

The securities pledged are only blocked in the account of pledger in favour of the pledgee. The pledger would continue to receive all the corporate benefits.

The DP gives a Transaction Statement periodically, which will detail current balances and various transactions made through the depository account. If so desired, DP may provide the Transaction Statement at intervals shorter than the stipulated ones, probably at a cost.

DPs have to provide transaction statements to their clients once in a month, if there are transactions and once in a quarter, if there are no transactions.
Moreover, DPs can provide transaction statement in electronic form under digital signature subject to their entering into a legally enforceable arrangement with the BOs to this effect.

In case of any discrepancy in the transaction statement, one can contact his/her DP. If the discrepancy cannot be resolved at the DP level, one should approach the Depository.

In case of any investor complaint / problem / query one may first contact his DP. If DP is unable to solve the complaint / problem / query one should approach concerned depository. If one is not satisfied one may approach SEBI. One may also approach SEBI directly.

If any person required to deliver a security in the market does not readily have that security, he can borrow the same from another person who is willing to lend as per the Securities Lending and Borrowing Scheme.

No. Lending and borrowing has to be done through an 'Approved Intermediary' registered with SEBI. The approved intermediary would borrow the securities for further lending to borrowers. Lenders of the securities and borrowers of the securities enter into separate agreements with the approved intermediary for lending and borrowing the securities. Lending and borrowing is effected through the depository system.

Yes. You can lend your securities through Approved Intermediaries registered with SEBI.

You may enter into an agreement with the approved intermediary to be a lender under this scheme. After that, you may lend securities any time by submitting lending instruction to your DP.

Intermediary may return the securities at any time or at the end of the agreed period of lending. Intermediary has to repay the securities together with any benefits received during the period of the loan.

The benefits will be given to the Intermediary/borrower. However, whenever the securities are being returned / recalled. Intermediary/borrower will return the securities together with benefits received.

Only individuals holding beneficiary accounts either singly or jointly can make nomination. Non-individuals including society, trust, body corporate, karta of Hindu Undivided Family, holder of power of attorney cannot nominate.

Only an individual can be a nominee. A nominee shall not be a society, trust, body corporate, partnership firm, Karta of Hindu Undivided Family or a power of attorney holder.

Transmission is the process by which securities of a deceased account holder are transferred to the account of his legal heirs / nominee. Process of transmission in case of dematerialised holdings is more convenient as the transmission formalities for all securities held in a demat account can be completed by submitting documents to the DP, whereas in case of physical securities the legal heirs/nominee/surviving joint holder has to independently correspond with each company in which securities are held.

The claimant should submit to the concerned DP an application Transmission Request Form (TRF) along with the following supporting documents

1. In case of death of sole holder where the sole holder has appointed a nominee,
   notarised copy of the death certificate is needed.
2. In case of death of the sole holder, where the sole holder has not appointed a nominee nnotarised copy of the death certificate is needed.
   Any one of the below mentioned documents -
   • Succession certificate
   • Copy of probated will
   • Letter of Administration
   • The DP, after ensuring that the application is genuine, will transfer securities to the account of the claimant
   • The major advantage in case of dematerialised holdings is that the transmission formalities for all securities held with a DP can be completed by interaction with the DP alone, unlike in the case of physical share certificates, where the claimant will have to interact with each Issuing Company or its Registrar separately.

Yes. Inter depository transfers are possible.

Every unit holder of the scheme will have an account number allotted to him and a statement of account of the units to the credit of his account will be issued.

For any investments made during the initial offer period the statements of account will be issued to all investors within 10 days after the closure of the offer. After the scheme reopens for subscription investors will be issued a statement of account detailing the number of units allotted. The Fund will endeavor to issue the statement of account within 5 business days after processing of the application. A fresh statement of account will be issued after every partial encashment / declaration of dividend / issue of bonus units / further purchase of units giving the total number of units standing to the investors’ credit. On every such operation the previous statement of account shall automatically stand cancelled.

In addition, each unit holder will also receive an annual account statement as soon as practicable after 31st March each year which will detail the investors opening unit balance as of 1st April of the prior year, all transactions that occurred during the preceding twelve months and the closing balance of units held as of 31st March.

No unit certificate will be issued under the scheme. However incase of a specific request unit certificate may be issued within 6 weeks from the receipt of request from the investor at the appropriate authorized centre.

Allotment of units will be made after realisation of Cheque/DD for the amount invested depending upon the NAV of the units, subject to the prevailing load structure in fractional units upto 3 decimals.

The NAV shall be calculated everyday including holidays and declared on each business day in accordance with the SEBI guidelines from time to time and will be displayed / available at the Corporate office, Registrars office and other Authorized Centers such as the Area Offices. The NAV along with the sale and repurchase prices will also be published in atleast 2 daily newspapers along with the sale and repurchase price on all business days in accordance with SEBI guidelines, and will be made available on the website and AMFI website on a daily basis.

Investors may redeem their entire holdings either in full or in part. Investors have also the option to request the redemption of a specified amount in Rupees or of a specified number of units of the scheme where the redemption request is for both a specified amount and for a specified number of units; the specified unit request is considered as definite. In case of a specified request for an amount in rupees, the number of units to be redeemed will be determined on the basis of the applicable repurchase price. Similarly, where the request is for a specified number of units for redemption, the redemption amount payable will be the number of units multiplied by the applicable repurchase price. Where the request for redemption exceeds the holdings of the unit holders, the account of the unit holder will be closed and the entire holding to the investor’s credit will be redeemed at the applicable repurchase price.

Repurchase/ redemption shall effect on receipt of the repurchase/ redemption request along-with the duly discharged statement of account mentioning the number of units offered amount sought for repurchase/ redemption at the authorised centre where the Units were originally purchased. The new statement of account, mentioning the units outstanding to the credit of investor, if any, will be sent to the investor separately and upon its receipt all previous statements of account will automatically stand cancelled.

On complete redemption of the holdings the investor’s ceases to be a member of the scheme and would not be entitled to any further benefits from the scheme.

Investments in mutual funds do classify for tax benefits. For specific provisions please refer to the respective offer documents.