NSE: 

Mutual Funds

Mutual Funds

Welcome to the world of Investments! Let your money grow with mutual funds investment solutions from Federal Bank

  • Features
  • How to Apply ?
  • Benefits
  • Systematic Investment Plan (SIP)
  • Documents Required

Money is one of the biggest necessities of life. Today, more than ever before, with rising aspirations, numerous opportunities to spend and longer life spans, merely earning a good income is not enough; it is equally important to invest your money wisely to ensure that it generates a good return. But selecting appropriate financial tools can sometimes be a bit tricky. And, that's exactly why it always helps to know as much as you can about investing.

What is a mutual fund?

A mutual fund allows a group of people to pool their money together and have it professionally managed, in keeping with a predetermined investment objective. This investment avenue is popular because of its cost-efficiency, risk-diversification, professional management and sound regulation. You can invest as little as Rs. 1,000 per month in a mutual fund. There are various general and thematic mutual funds to choose from and the risk and return possibilities vary accordingly.

Key features

  • Professional investment management.
  • Diversification of Portfolio.
  • Low Cost of Investment.
  • Convenience and Flexibility to invest any amount anytime.
  • Quick and Personalized Services from AMC.
  • Ease of Investing.
  • High Liquidity.
  • Choice of Dividend or Growth Options.
  • Tax Savings Funds also available

Diversification

Diversification involves holding a wide variety of investments in a portfolio so as to mitigate risks. Mutual funds usually spread investments across various industries and asset classes, constrained only by the stated investment objective. Thus, by investing in mutual fund, you can avail of the benefits of diversification and asset allocation, without investing the large amount of money that would be required to create an individual portfolio. 

Professional Management 

Mutual funds employ experienced and skilled professionals, who conduct investment research, and analyze the performance and prospects of various instruments before selecting a particular investment. Thus, by investing in mutual funds, you can avail of the services of professional fund managers, which would otherwise be costly for an individual investor. 

Liquidity 

In an open-ended scheme, unit holders can redeem their units from the fund house anytime, by paying a small fee called an exit load, in some cases. Even with close-ended schemes, one can sell the units on a stock exchange at the prevailing market price. Besides, some close-ended and interval schemes allow direct repurchase of units at NAV related prices from time to time. 

Flexibility 

Mutual funds offer a variety of plans, such as regular investment, regular withdrawal and dividend reinvestment plans. Depending upon one's preferences and convenience, one can invest or withdraw funds, accordingly. 

Cost Effective 

Since mutual funds have a number of investors, the fund's transaction costs, commissions and other fees get reduced to a considerable extent. Thus, owing to the benefits of larger scale, mutual funds are comparatively less expensive than direct investment in the capital markets. *

Well Regulated

Mutual funds in India are regulated and monitored by the Securities and Exchange Board of India (SEBI), which strives to protect the interests of investors. Mutual funds are required to provide investors with regular information about their investments, in addition to other disclosures like specific investments made by the scheme and the proportion of investment in each asset class. 
*Mutual Funds are subject to market risk. Please read the offer document carefully before investing. Terms and Conditions apply

Mutual Fund Systematic Investment Plan (SIP) gives an opportunity to create wealth over long term. Systematic Investment Plan is like a Recurring Deposit wherein the investor needs to remit a fixed amount into a chosen scheme for a predefined period.  The advantage of SIP is that there is a lot of flexibility to change all these parameters subsequently also based on any change in our Investment Horizon or our expectations from the schemes.

SIP work using two important levers- Power of compounding and Rupee cost averaging.  

 

How does Power of compounding work in SIP?

The compounding refers to the re-investment of income at a rate of return to constantly grow the principal amount year after year. Getting the benefit of  the Power of Compounding requires the customer to remain invested for a longer period.  Starting early in life and remaining invested focusing on  specific goals is the basic mantra of investment.

An illustration is given below to prove the point. Compounded Annual Growth Rate of 10% considered for illustrative purpose.

           

Investor

A

B

 

Invested Rs 1000 through SIP at the age of 20

Invested Rs.2000 through SIP at the age of 40

Total amount Invested

480000

480000

Amount at the age of 60

63.24 lakhs

15.19 lakhs

 

 

 

What is Rupee Cost Averaging ?

 

Rupee cost averaging helps to buy more units when markets are low and less units when markets are high. The following illustration explains the principle behind rupee cost averaging.

 


 

Lumpsum Investor

Regular Investor (SIP)

Month   

 

Unit Price/

NAV

Amount Invested (in Rs.)

Units Purchased

Amount Invested (in Rs.)

Units Purchased

     1

25

 100000

4000

   10000

400

     2

28

 

                       

   10000

357

     3

30

 

 

   10000

333

     4

27

 

 

   10000

370

     5

24

 

 

   10000

417

     6

26

 

 

   10000

385

     7

23

 

 

   10000

435

     8

20

 

 

   10000

500

     9

22

 

 

   10000

455

    10

25

 

 

   10000

400

Total Units Purchased

 

 

4000

 

4052

Total Amount Invested

 

 

100000

   100000

 

Average Price (Rs.)

 

 

25

   25

 

Value of investment after 10 months

 

 

100000

  101300

 

 

 

Suppose a monthly SIP is for Rs 1000 and the fund's net asset value (NAV) is Rs 10. This will result in 100 units being credited to you. However, next month, on account of volatile market conditions   if the fund's NAV falls to Rs 5, you will get 2,00 units. This will lower your average purchase cost. A SIP helps you to buy more when the stock market is falling and less when it is rising.

 

Proof of Identity (POI)

  1. PAN card with photograph.
  2. Unique Identifi cation Number (UID) (Aadhaar)/Passport/Voter ID card/Driving license.
  3. Identity card/ document with applicant's Photo, issued by any of the following: Central/State Government and its Departments, Statutory/Regulatory Authorities, Public Sector Undertakings, Scheduled Commercial Banks, Public Financial Institutions, Colleges affiliated to Universities, Professional Bodies such as ICAI, ICWAI, ICSI, Bar Council etc., to their Members; and CreditCards/Debit cards issued by Banks.

Proof of Address (POA)

  1. Passport/Voters Identity Card/Ration Card/Registered Lease or Sale Agreement of Residence/Driving License/Flat Maintenance bill/Insurance Copy.
  2. Utility bills like Telephone Bill (only land line),
  3. Bank Account Statement/Passbook -Not more than 3 months old.

For Non-Residents

  1. Copy of passport/PIO Card/OCI Card and overseas address proof (Bank Statement) is mandatory.
  2. PAN card with photograph.

For MICRO SIPs (Resident and NRI) Micro SIPs - the aggregate of installments in a rolling 12 month period or in a financial year i.e. April to March does not exceed Rs 50,000/- Unique Identification Number (UID) (Aadhaar)/Passport/Voter ID card/Driving license.

Other Documents

The following documents are also required for investing into Mutual funds:

  • CAF (Common Application Form)
  • Auto Debit/ ECS Mandate forms
  • KYC forms (One-time registration of KYC compliance is required for investment across all funds.)
Attention Investors

Prevent Unauthorized Transactions in your demat account - Update your Mobile Number with your Depository Participant. Receive alerts on your Registered Mobile for all debit and other important transactions in your demat account directly from NSDL on the same day. Issued in the interest of investors. KYC is one time exercise while dealing in securities markets - once KYC is done through a SEBI registered intermediary (broker, DP, Mutual Fund etc.), you need not undergo the same process again when you approach another intermediary. No need to issue cheques by investors while subscribing to IPO. Just write the bank account number and sign in the application form to authorise your bank to make payment in case of allotment. No worries for refund as the money remains in investor's account