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Over the years, mutual funds have emerged as a dependable and popular way to enhance one's financial situation. It acts as a substitute for more traditional investment options, including real estate, gold holdings, overnight funds, term deposits, and so forth.
With Kotak Mahindra Bank, you can avail the opportunity to grow your wealth through mutual fund investments. And enjoy various services the bank provides like portfolio management, pension fund management and many others.
A mutual fund is a collection of funds that are professionally managed by a fund manager, who allocates the funds among stocks, bonds, money market instruments, and/or other securities based on the fund's investment goal.
Why are debt hybrid mutual funds a great investment?
Why are debt hybrid mutual funds a great investment?
Here’s how you can invest in companies like Starbucks, Airbnb and Google
Market Perspective
In India, mutual funds are categorised according to the asset classes in which they make investments. Here are a few common categories:
Please follow the following steps while investing in Kotak.
Before investing, ensure you have completed your KFC to make the process smoother and hassle-free.
Mutual fund (MF) is a mechanism for pooling money by issuing units to the investors and investing funds in securities in accordance with objectives disclosed in the offer document.
Investments in securities are spread across a wide cross-section of industries and sectors and thus the risk is diversified because all stocks may not move in the same direction in the same proportion at the same time. Mutual funds issue units to the investors in accordance with the quantum of money invested by them. Investors of mutual funds are known as unitholders.
Investors in proportion to their investments share the profits or losses. Mutual funds normally come out with a number of schemes, which are launched from time to time with different investment objectives. A mutual fund is required to be registered with the Securities and Exchange Board of India (SEBI) before it can collect funds from the public.
Purchase - Login to your Net banking account, select the investment tab and proceed with the purchase option. Select category of scheme eg. Equity or Debt.
For mobile banking investors, you need to login to your mobile banking app, select investment option and then purchase the mutual fund.You can also visit the nearest branch if you need assistance in investing in Mutual funds.
Redeem - Login to your Net banking account, select investment tab, and proceed with the redemption option for the required fund transaction.
For mobile banking investors, you need to login to your mobile banking app, select investment option, then select redemption option.
You can also visit the nearest branch if you need assistance to redeem your funds.
An SIP allows an investor to invest regularly. One puts in a small amount every month that is invested in a mutual fund. An SIP allows one to take part in the stock market without trying to second-guess its movements
An Investment Horizon refers to the length of time that an investor is willing to hold the portfolio for. Investment horizon can be classified as following
Know Your Client (KYC) registration is mandatory for all investor as per SEBI guidelines. KYC is being centralized through KYC Registration Agencies (KRAs) registered with SEBI. With this, each investor has to undergo the KYC process only once in the securities market and the details would be shared with other intermediaries by the KRAs.
NAV is the market value per-unit of all the securities held by the fund. NAV determines performance of a particular scheme of a mutual fund. Mutual funds invest the money collected from investors in securities markets. In simple words, NAV is the market value of the securities held by the scheme.
If you choose the Growth plan of a mutual fund, the fund will compulsorily reinvest any gains earned in the fund. It does not offer any pay-out. Profits made on the portfolio are necessarily ploughed back into the scheme. These growth plans are continuous compounders of your wealth.
If you choose the dividend payout plan of a mutual fund, a portion of the return/fund is paid out periodically to the investor. The NAV of a dividend fund faces a drop in value to the extent of dividend paid out.
In a dividend reinvestment plan, the mutual fund buys units to the extent of the dividend declared by the fund at the post-dividend NAV and credits units to the account. This results in an increase in the number of units.
The purchase price / Purchase NAV is the price at which Investor buys the unit of a scheme. Units are allotted to customer on basis of amount invested divided by NAV as on Investment date.
Repurchase or redemption NAV is the price at which Investor sells the unit (Minus any load if applicable) Exit load is chargeable as a percentage of NAV if investment is redeemed before the Exit load time
A Load Fund is one that charges a percentage of NAV for entry or exit into the fund. The load structure of a scheme has to be disclosed in its offer documents. In accordance with the SEBI circular no. SEBI/IMD/CIR No.4/168230/09 dated 30 June 2009, there is no entry load for any/all mutual fund schemes.
Exit load is generally charged if the exit is made before a specified time. For example in most equity funds, the exit load is 1% if the exit is before 1 year. Assuming you bought the fund at a NAV of INR 10, after 6 months the NAV is ₹ 11 and you wish to exit from the fund, you will be charged 1% of 11 = 0.11 and your redemption proceeds would be ₹10.89 (₹11-₹0.11)
Currently, in India, the exit load charged is credited to the scheme. The investors should consider the loads while making investment as these affect their returns. However, the investors should also consider the performance track-record of accomplishment and service standards of the mutual fund which are more important. A no-load fund is one that does not charge for entry or exit load. It means the investors can enter the fund/scheme at NAV and no additional charges are payable on purchase or sale of units.
These schemes provide tax benefit of up to Rs. 1.5 lakhs under Sec 80C of the Income Tax Act, 1961. They are pure equity funds, however they come with a lock-in period of 3 years. Such funds not only help the investor save tax but also participate in equity markets.
Expense ratio is the cost of running and managing a mutual fund, which is charged to the scheme. Expense ratio represents the annual fund operating expenses of a scheme and other charges, expressed as a percentage of the fund’s average daily net assets. Operating expenses of a scheme are administration, management, advertising related expenses, etc.
Schemes according to Maturity Period - A mutual fund scheme can be classified into an open-ended scheme or a close-ended scheme depending on its 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. These schemes do not have a pre-defined maturity period. Investors can conveniently buy and sell units at Net Asset Value (NAV) per unit which is declared on a daily basis. The key feature of open-end schemes is liquidity.
Close-ended Fund/Scheme - A close-ended fund or scheme has a stipulated maturity period e.g. typically 3–5 years. The fund is open for subscription only during a specified period at the time of launch of the scheme. Investors can invest in the scheme at the time of the new fund offer and thereafter they can buy or sell the units of the scheme on the stock exchanges where the units are listed, however liquidity may be very low for such schemes in the secondary market. In order to provide an exit route to the investors, some close-ended funds give an option of selling back the units to the mutual fund through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one either of the two exit routes is provided to the investor i.e. repurchase facility or through listing on stock exchanges.
Schemes according to Investment Objective - A scheme can also be broadly classified as Equity, debt or Hybrid 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:
Equity Scheme - These invest predominantly in equities i.e. shares of companies. The primary objective is wealth creation or capital appreciation. They have the potential to generate higher return and are best for long term investments.
Debt Scheme - Debt Mutual Funds mainly invest in a mix of debt or fixed income securities such as Treasury Bills, Government Securities, Corporate Bonds, Money Market instruments and other debt securities of different time horizons. Generally, debt securities have a fixed maturity date & pay a fixed rate of interest. The return from such funds is attributed to interest income and capital appreciation /depreciation in value due to changes in interest rates and market dynamics.
Hybrid Scheme - Funds which invests in a mix of assets are known as Hybrid funds. These funds can invest in equity, debt and/or gold. The most popular funds choose to invest in a mix of equity & debt. The asset allocation is mentioned in their offer documents. These are appropriate for investors looking for moderate growth. They generally invest 40–60% in equity and debt instruments.
Money Market or Liquid Schemes - These schemes invest in liquid instruments with an aim is to provide easy liquidity, preservation of capital and moderate income.
These schemes invest exclusively in short-term instruments such as treasury bills, certificates of deposit, commercial paper and inter-bank call money, Government securities, etc. Such funds are appropriate for investors as a means to park their surplus funds for short periods.
Gilt Funds - 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 as is the case with income or debt oriented schemes.
Index Funds - Index Funds replicate the portfolio of a particular index such as the BSE Sensitive Index (Sensex), NSE 50 Index (Nifty), etc. These schemes invest in securities in the same weightage 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.
These are the funds/schemes 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, Information Technology (IT), Banks, 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 with diversified funds since they focus on specific sectors.
