ArthGanak Financial Services - Mutual Fund

"Mutual Fund Sahi Hai"

Mutual Fund Sahi Hai - Why?

Mutual Funds

If you want to generate wealth over long term, then your money should be working while you sleep. It works always with Stock Market. Stock market is risky and now a days you need to analyse too much before you invest for long term. It is not possible to everyone. It can be easily achieve with Mutual Funds investment. The Fund management team is expert, equipped and working full time for wealth genertion of your investment. Mutual Fund is a calculated risk and long term vision tool to generate wealth with the experts help. That is why Mutual Funds are called as "Mutual Fund Sahi Hai!".

What is Mutual Fund?

A mutual fund is a collective investment vehicle that collects & pools money from a number of investors and invests the same in equities, bonds, government securities, money market instruments.

The contract is valid for payment of the insured amount during:
  • The money collected in mutual fund scheme is invested by professional fund managers in stocks and bonds etc. in line with a scheme's investment objective.
  • The income / gains generated from this collective investment scheme are distributed proportionately amongst the investors, after deducting applicable expenses and levies, by calculating a scheme's Net Asset Value or NAV.
  • In return, mutual fund charges a small fee.
In short, mutual fund is a collective pool of money contributed by several investors and managed by a professional Fund Manager. Mutual Funds in India are established in the form of a Trust under Indian Trust Act, 1882, in accordance with SEBI (Mutual Funds) Regulations, 1996. The fees and expenses charged by the mutual funds to manage a scheme are regulated and are subject to the limits specified by SEBI.

How Mutual Fund Works?

One should avoid the temptation to review the fund's performance each time the market falls or jumps up significantly. For an actively-managed equity scheme, one must have patience and allow reasonable time - between 18 and 24 months - for the fund to generate returns in the portfolio.

Mutual funds are ideal for investors who -
  • Lack the knowledge or skill / experience of investing in stock markets directly.
  • Want to grow their wealth, but do not have knowledge or time to research the stock market.
  • Wish to invest only small amounts.
When you invest in a mutual fund, you are pooling your money with many other investors. Mutual fund issues Units against the amount invested at the prevailing NAV. Returns from a mutual fund may include income distributions to investors out of dividends, interest, capital gains or other income earned by the mutual fund. You can also have capital gains (or losses) if you sell the mutual fund units for more (or less) than the amount you invested. Mutual Fund is best way to invest & take advantage stock market.

Mutual Fund FAQ

Why Invest in Mutual Funds?

As investment goals vary from person to person like post-retirement expenses, money for children's education or marriage, house purchase, etc. - the investment products required to achieve these goals too vary. Mutual funds provide certain distinct advantages over investing in individual securities.
Mutual funds offer multiple choices for investment across equity shares, corporate bonds, government securities, and money market instruments, providing an excellent avenue for retail investors to participate and benefit from the uptrends in capital markets.
The main advantages are that you can invest in a variety of securities for a relatively low cost and leave the investment decisions to a professional manager.

Mutual Fund - Categories

As per SEBI guidelines on Categorization and Rationalization of schemes issued in October 2017, mutual fund schemes are classified as -

  • Equity Schemes
  • Debt Schemes
  • Hybrid Schemes
  • Solution Oriented Schemes - For Retirement and Children
  • Other Schemes - Index Funds & ETFs and Fund of Funds

- Under Equity category, Large, Mid and Small cap stocks have now been defined.
- Naming convention of the schemes, especially debt schemes, as per the risk level of underlying portfolio.
- Balanced / Hybrid funds are further categorised into conservative, balanced and aggressive Hybrid Fund.

Mutual Fund - Equity Schemes

An equity Scheme is a fund that -

  • Primarily invests in equities and equity related instruments.
  • Seeks long term growth but could be volatile in the short term.
  • Suitable for investors with higher risk appetite and longer investment horizon.
The objective of an equity fund is generally to seek long-term capital appreciation. Equity funds may focus on certain sectors of the market or may have a specific investment style, such as investing in value or growth stocks.

Mutual Fund - Equity Categorization

Equity Fund Categories as per SEBI guidelines on Categorization and Rationalization of schemes

Fund Category Min Equity % Large Cap % Mid Cap % Small Cap %
Multi Cap Fund75%25%25%25%
Large Cap Fund80%80%80%
Large & Mid Cap Fund70%35%35%
Mid Cap Fund65%65%
Small Cap Fund65%65%
Dividend Yield Fund65%
Value Fund65%
Contra Fund65%
Focused Fund65%
Sector / Thematic Fund80%
Elss Fund80%
Flexi Fund65%

Mutual Fund - Debt Schemes

A debt fund (also known as income fund) is a fund that invests primarily in bonds or other debt securities. -

  • Debt funds invest in short and long-term securities issued by government, public financial institutions, companies - Treasury bills, Government Securities, Debentures, Commercial paper, Certificates of Deposit and others
  • Debt funds can be categorized based on the tenor of the securities held in the portfolio and/or on the basis of the issuers of the securities or their fund management strategies, such as...
    • Short-term funds, Medium-term funds, Long-term funds
    • Gilt fund, Treasury fund, Corporate bond fund, Infrastructure debt fund
  • Floating rate funds, Dynamic Bond funds, Fixed Maturity Plans
  • Debt funds have potential for income generation and capital preservation.

Mutual Fund - Debt Schemes Categories

Debt Fund Categories as per SEBI guidelines on Categorization and Rationalization of schemes

Fund Category Security / Instrument Duration / Maturity
Overnight FundOvernight 1 Day
Liquid FundDebt & money market Upto 91 Days
Ultra Short Duration FundDebt & money market 3 to 6 months
Low Duration FundDebt & money market 6 to 12 months
Money Market FundMoney market upto 1 year
Short Duration FundDebt & Money market 1 to 3 years
Medium Duration FundDebt & Money market 3 to 4 years
Medium to Long Duration FundDebt & Money market 4 to 7 years
Long Duration FundDebt & Money market greater than 7 years
Dynamic Bond Debt & Money market Across Duration
Corporate Bond 80% in Corporate Bond only in AA+ and Above rated
Credit Risk Fund 65% in Corporate Bond only in AA and Below rated
Banking and PSU Fund 80% in Debt Issued by banks, Public undertakings etc
Gilt Fund 80% in G-secs Across Maturity
Gilt Fund with 10 Years Constant Maturity 80% in G-secs equal to 10 years
Floater Fund 65% in Floating rate including fixed rate instruments

Mutual Fund - Hybrid Schemes

Invest in a mix of equities and debt securities. They seek to find a 'balance' between growth and income by investing in both equity and debt. -

  • The regular income earned from the debt instruments provide greater stability to the returns from such funds.
  • The proportion of equity and debt that will be held in the portfolio is indicated in the Scheme Information Document
  • Equity oriented hybrid funds (Aggressive Hybrid Funds) are ideal for investors looking for growth in their investment with some stability.
  • Debt-oriented hybrid funds (Conservative Hybrid Fund) are suitable for conservative investors looking for a boost in returns with a small exposure to equity.
  • The risk and return of the fund will depend upon the equity exposure taken by the portfolio - Higher the allocation to equity, greater is the risk

Mutual Fund - Hybrid Schemes

SEBI has classified Hybrid funds into 7 sub-categories as follows

Fund Category Equity Debt
Conservative Hybrid Fund10 to 25% 75 to 90%
Balanced Hybrid Fund40 to 60% 40 to 60%
Aggressive Hybrid Fund65 to 80% 20 to 35%
Dynamic Asset Allocation or Balanced Advantage Fund0 to 100% 0 to 100%
Multi Asset Allocation Fund Atleast 10% at 3 Investment class
Arbitrage FundAtleast 65%Arbitrage strategy
Equity Savings Minimum 65% Minimum 10% & rest in derivatives

Mutual Fund - Solution Oriented

SEBI has classified Solution oriented and other fund as follows

Fund Category Class of Investment Lock in
Retirement FundEquity, Debt, Hybrid 5 years or till retirement age
Children's FundEquity, Debt, Hybrid 5 years or till Child attend major age
Index Funds/ ETFsMinimum 95% investment in securities of a particular index --
Fund of Funds (Overseas/ Domestic)Minimum 95% investment in securities of a Underlying fund(s) --

Our Association - with all Mutual Fund AMC and Insurances.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

Plan, review and / or revisit your financial goal. We will help you achieve goals.

ArthGanak Financial Services is a call or message away...

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+91 901 105 9137

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+91 901 105 9137

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