NEW TO MUTUAL FUND

CONCEPTS OF MUTUAL FUNDS

What is a Mutual Fund?

A Mutual fund is trust that collects money from a number of investors who share a common investment objective and invests the same in equities, bonds, money market instruments and/or other securities. The income/gains generated from this collective investment is distributed proportionately among the investors after deducting applicable expenses and levies, by calculating a scheme’s “Net Asset Value” or NAV. Simply put, the money pooled in by a large number of investors is what makes up a Mutual Fund.

What are the different types of Mutual Fund schemes?

  • Schemes according to Maturity Period:

    A mutual fund scheme can be classified into open-ended scheme or close-ended scheme depending on its maturity period.

    • Open-ended Fund: 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 fixed maturity period. Investors can conveniently buy and sell units at Net Asset Value (NAV) related prices after deduction of exit load, if any which are declared on a daily basis. The key feature of open-end schemes is liquidity.
    • Close-ended Fund: A close-ended fund or scheme has a stipulated maturity period e.g. 3 years, 5 years, 10 years etc. The fund is open for subscription only during a specified period at the time of the launch of the scheme. Investors can invest in the scheme at the time of the initial public issue. In order to provide an exit route to investors, some close-ended funds give an option of selling back the units to the mutual fund through periodic repurchase at NAV related prices. Some close-ended funds are also listed on stock exchanges in order to facilitate liquidity.
  • Schemes according to Investment Objective:

    A mutual fund scheme can also be classified as a equity/growth fund, debt/income fund, liquid fund or balanced fund based on its investment objective. Such funds may be open-ended or close-ended as described earlier.

    • Equity/Growth Fund: An equity fund is a mutual fund scheme that invests predominantly in equity stocks. In the Indian context, as per current SEBI Mutual Fund Regulations, an equity mutual fund scheme must invest at least 65% of the scheme’s assets in equities and equity related instruments. Equity mutual funds are principally categorized according to company size, the investment style of the holdings in the portfolio and geography. The size of an equity fund is determined by the market capitalization of the stocks that it invests in, while the investment style, reflected in the fund's stock holdings, is also used to categorize equity mutual funds. Equity funds are also categorized by whether they are domestic (investing in stocks of only Indian companies) or international (investing in stocks of overseas companies). These can be broad market, regional or single-country funds. Some specialty equity funds target business sectors, such as health care, commodities and real estate and are known as Sectoral Funds. An Equity Fund can be actively managed or passively managed. Index funds and ETFs are passively managed.
    • Debt/Income Fund: A debt fund is a mutual fund scheme that invests in fixed income instruments, such as Corporate and Government Bonds, corporate debt securities, and money market instruments etc. Debt funds are also referred to as Income Funds or Bond Funds. Debt funds are ideal for investors who want regular income, but are risk-averse. Debt funds are less volatile and, hence, are less risky than equity funds. If you have been saving in traditional fixed income products like Term Deposits, and looking for steady returns with low volatility, debt mutual funds could be a better option, as they help you achieve your financial goals in a more tax efficient manner and therefore offer potentially superior post-tax returns.
    • Liquid Fund: Liquid Funds as the name suggests, invest predominantly in highly liquid money market instruments and debt securities of very short tenure and hence provide high liquidity. They invest in very short-term instruments such as Treasury Bills (T-bills), Commercial Paper (CP), Certificates Of Deposit (CD) and Collateralized Lending & Borrowing Obligations (CBLO) that have residual maturities of up to 91 days to generate optimal returns while maintaining safety and high liquidity. Redemption requests in these Liquid funds are processed within one working (T+1) day. The aim of the fund manager of a Liquid Fund is to invest only into liquid investments with good credit rating with very low possibility of a default. The returns typically take the back seat as protection of capital remains of utmost importance. Control over expenses in the form of low expense ratio, good overall credit quality of the portfolio and a disciplined approach to investing are some of the key ingredients of a good liquid fund. Most retail customers prefer to keep their surplus cash in Savings Bank deposits as they consider the same to be safest and they could withdraw the money at any time. Liquid Funds and Money Market Mutual Funds provide a more attractive option. Surplus cash invested in money market mutual funds earns higher post-tax returns with a reasonable degree of safety of the principal invested and liquidity.
    • Balanced Fund: A balanced fund combines equity stock component, a bond component and sometimes a money market component in a single portfolio. These funds invest in a mix of equities and debt, giving the investor the best of both worlds. Balanced funds gain from a healthy dose of equities but the debt portion fortifies them against any downturn. Balanced funds are suitable for a medium-term horizon and are ideal for investors who are looking for a mixture of safety, income and modest capital appreciation. The amounts this type of mutual fund invests into each asset class usually must remain within a set minimum and maximum.

What are the advantages of Investing in Mutual Funds?

Investing in mutual funds will offer both retail as well as institutional investors with innumerable advantages over direct investments in the markets:

  • Diversification: Mutual funds invest in a basket of securities rather than a few stocks. This offers investors the benefits of diversification as the risk is spread across a number of securities. Even if an investor has a small amount to invest, by investing in a mutual fund, he gets exposure to the entire portfolio of securities as he is part of a larger pool of investors. This is not possible if an investor would invest directly in the stock market.
  • Professional Management: Mutual Funds are managed by dedicated fund managers who are responsible for all the investment decisions and monitoring the performance of the fund. The fund managers usually have a wealth of experience and are professionals in the field of portfolio management i.e. their sole job is managing your money!
  • Economies Of Scale: Buying individual stocks and bonds is expensive in terms of transactions costs. Mutual funds offer the advantage of economies of scale in purchases and sales because mutual fund transactions are typically large, thereby reducing transaction costs for investors.
  • Flexible & Innovative Plans: There is certainly no “one size fits all” formula with Mutual Funds. There are various types of mutual funds to suit all types of investment horizons, liquidity requirements and risk appetites. Mutual Funds also offer the flexibility to switch between plans, options or fund categories keeping in mind that investor requirements change over time.
  • Liquidity: Mutual fund investments are also extremely liquid and investor’s in open-ended funds can redeem their investments on any business day. Liquid Fund investors usually receive the money within T+1 working day while investors in other funds can expect to receive their investment proceeds within T+3 working days.
  • Transparency: Mutual funds disclose their NAVs on all business days, so performance of mutual funds is extremely transparent and can be tracked very easily, Also, mutual funds disclose their portfolios at the end of every month and the same is displayed on the AMC websites. In addition, most mutual funds regularly communicate with their investors in the form of monthly factsheets, product updates as well as fund manager’s outlook on the markets.
  • Tax Benefits: Some mutual fund schemes offer tax benefits under Section 80C of the Income Tax Act which means that an investment in such schemes upto Rs1.5 lakh in exempt from income tax. Furthermore, mutual fund investments offer several tax benefits – All dividends declared by mutual funds is tax free in the hands of the investor; Investments in equity funds over 1 year in exempt from tax while debt fund investments over 3 years is subject to long-term capital gains tax.
  • Well Regulated: All mutual funds are governed by SEBI and follow stringent regulations as laid down by the regulator. In addition, mutual funds are subject to several audits to ensure that they are always working as per the regulatory guidelines and in the best interests of unit holders.

METHODOLOGY FOR CALCULATING THE SALE AND REPURCHASE PRICE OF UNITS

Illustration

  • Price for subscription (purchase) / switch-in (from other Schemes/plans of the Mutual Fund) by investors: This is the price you need to pay for purchase/ switch-in.

Example: If the applicable NAV is Rs.10, entry load is 2%, then sale price (Purchase Price) will be: Rs.10* (1+0.02) = Rs.10.20

The above is only an example. However, currently mutual funds do not charge any Entry Load.

  • Price for redemption (sale) /switchouts (to Schemes/plans of the Mutual Fund) by investors: This is the price you will receive for redemptions/ switch-outs.

Example: If the applicable NAV is Rs.10, exit load is 2%, then redemption price will be: Rs.10* (1-0.02) = Rs. 9.80

HOW TO CHOOSE A MUTUAL FUND SCHEME

There is a plethora of Mutual Fund schemes available and choosing the right scheme may at first appear as a daunting task. However, if you follow certain simple guidelines, this task may actually be far simpler than you think. While selecting of a mutual fund scheme keep in mind your investment time horizon, financial goals and risk appetite.

  • Time Horizon: Are you willing to invest for the long-term (over 5 years) or do you think you will require the money sooner than that? While investing in a mutual fund, it is very important to keep in mind when you will require the funds that you are investing. Liquid funds are best suited for very short-term deployment of funds (up to 3 months) while equity funds are best suited to long-term deployment of funds (over 5 years). These are 2 ends of the spectrum and depending on your requirements there are various other funds to choose from such as short term income funds, long term income funds, monthly income funds, balanced funds etc.
  • Financial Goals: It is prudent to lay down your financial goals and the amount of time you have to achieve them e.g. buying a car, buying a house, education expenses, children’s marriage etc. Some mutual fund schemes are suitable for short term requirements or goals, whereas some might be better for long term goals.
  • Risk Appetite: Different investors would have different risk appetites. Some are comfortable with high risk products, whereas some are just not. There are mutual fund schemes to suit all risk profiles - At the lowest end of the risk profile are liquid funds while sectorial equity funds have the highest risk profiles.

ROLE OF SEBI & AMFI

Role of SEBI:

SEBI (Securities and Exchange Board of India) was established in 1992 to protect the interest of investors in the securities market and to regulate and promote the development of the securities market. Following are the broad functions of SEBI:

  • Regulating the business in stock exchanges and other securities markets.
  • Registering and regulating the working of stock brokers, sub-brokers, mutual funds, portfolio managers, investment advisors, share transfer agents, merchant bankers etc.
  • Prohibiting fraudulent and unfair trade practices relating to securities markets.

SEBI’s role in the Mutual Fund industry:

  • All mutual funds, whether promoted by the private or public sector are regulated by SEBI.
  • SEBI notified regulations for mutual funds in 1993.
  • SEBI also issues various guidelines to mutual funds from time to time to protect the interests of investors.
  • All new scheme launches or changes in fundamental attributes of existing schemes need prior approval of SEBI.

Role of AMFI:

AMFI (Association of Mutual Funds in India) was incorporated in 1995 as a non-profit organization with the aim of protecting the interests of mutual fund investors and promoting the mutual fund industry. AMFI is an industry body and all the 42 SEBI registered Asset Management Companies are members of AMFI.AMFI is dedicated to developing the Indian Mutual Fund Industry on professional, healthy and ethical lines and to enhance and maintain standards in all areas with a view to protecting and promoting the interests of mutual funds and their unit holders. Following are the objectives of AMFI:

  • To define and maintain high professional and ethical standards in all areas of operation of the mutual fund industry.
  • To recommend and promote best business practices and code of conduct to be followed by members and others engaged in the activities of mutual fund and asset management including agencies connected or involved in the field of capital markets and financial services.
  • To interact with SEBI and to represent to SEBI on all matters concerning the mutual fund industry.
  • To represent to the Government, Reserve Bank of India and other bodies on all matters relating to the Mutual Fund Industry.
  • To undertake nation-wide investor awareness programs so as to promote proper understanding of the concept and working of mutual funds.
  • To disseminate information on Mutual Fund Industry and to undertake studies and research directly and/or in association with other bodies.
  • To take regulate conduct of distributors including disciplinary actions (cancellation of ARN) for violations of Code of Conduct.
  • To protect the interest of investors/unit holders.

BOI AXA MUTUAL FUND PRODUCTS

Open Ended Schemes:


1. BOI AXA Large & Mid Cap Equity Fund (Formerly BOI AXA Equity Fund)

  • Diversified equity fund investing predominantly in large and mid-cap stocks
  • Top down approach for development of themes: Evaluates global and domestic economy and the policy environment to develop themes.
  • Well diversified portfolio with greater risk control.
  • An ideal product for an investor who is looking to start investing in equity markets.

2. BOI AXA Tax Advantage Fund

  • Open-ended equity linked saving scheme (ELSS).
  • Suited for investors who wish to avail of the long-term benefits of equity investing coupled with tax benefits under Section 80C of Income Tax Act 1961.
  • The fund is open-ended for subscription. However, as per the IT Act, investors in ELSS have to remain invested for a minimum period of 3 years.
  • A diversified, equity multi-cap fund that can invest across sectors and market caps.
  • The fund generally takes higher exposure to mid-caps as compared to BOI AXA Equity Fund.

3. BOI AXA Manufacturing & Infrastructure Fund

  • An Open Ended Equity Scheme investing in manufacturing and infrastructure sectors
  • Invests solely in companies belonging to manufacturing and infrastructure sectors.
  • Suitable to the more experienced equity investor who wants to take specific exposure to these specific sectors.
  • Being a sectoral fund, it generally experiences more volatility in returns as compared to a diversified equity fund.

4. BOI AXA Equity Debt Rebalancer Fund

  • Open-ended dynamic asset allocation fund investing in both equity and debt.
  • Suitable for medium-term deployment of funds -Ideal for those who have an investment horizon of 2+ years.
  • The fund follows a dynamic asset allocation between equity and fixed income based on equity market valuations.
  • The fund can invest between 15-85% in equities and 15-85% in Fixed Income depending on market (Nifty 50 Index) PE. Upto 10% of the portfolio can be invested in units of InvITs / REITs

5. BOI AXA Mid & Small Cap Equity & Debt Fund (Formerly BOI AXA Mid Cap Equity & Debt Fund)

  • An open-ended equity fund which invests between 65 to 80% in mid cap equities and the remaining in fixed income securities.
  • Ideal for those who have an investment horizon of 3+ years.
  • By investing in a mix of mid & small cap equities and debt, the debt instruments offer a cushion and help reduce the volatility of the portfolio.
  • Endeavors to provide higher return than traditional balanced funds and with lower volatility as compared to pure mid cap equity funds.

6. BOI AXA Conservative Hybrid Fund (Formerly BOI AXA Regular Return Fund) 

  • An open ended conservative hybrid fund with a mandate to invest 75%-90% in debt & money market instruments and 10-25% in equity and equity related securities.
  • The equity component offers investors the opportunity for higher returns as compared to traditional fixed income instruments.
  • The fixed income component offers stability of portfolio as the major part of the portfolio is always invested in debt / money market instruments.
  • An ideal investment avenue for the traditional fixed income investor who wants some exposure to equity.

7. BOI AXA Credit Risk Fund (Formerly BOI AXA Corporate Credit Spectrum Fund)

  • An open-ended credit risk fund suitable for long-term deployment of funds.
  • Suitable only for long-term, sophisticated investors with a horizon of at least 3 years.
  • Seeks to generate capital appreciation over the long term by investing predominantly in corporate debt across the credit spectrum.
  • Aims to provide superior risk adjusted returns by investing in vanilla and structured corporate credit issuances across the credit spectrum.

8. BOI AXA Short Term Income Fund

  • Open-ended debt fund suitable for medium-term deployment of funds.
  • An ideal investment avenue for an investment horizon of 1 year to 3 years.
  • Suitable for those who are looking for an alternative to Fixed Deposits with liquidity and tax efficiency.
  • It endeavors to provide returns that are higher than those of ultra short term income funds by maintaining a higher portfolio duration.

9. BOI AXA Ultra Short Duration Fund (Formerly BOI AXA Treasury Advantage Fund)

  • An open-ended ultra short duration debt fund suitable for short-term deployment of funds.
  • An ideal investment avenue for short to medium term parking of funds.
  • Suitable for those with an investment horizon of 3 to 6 months.
  • It endeavors to provide returns that are higher than those of liquid funds by maintaining a higher portfolio duration.

10. BOI AXA Liquid Fund

  • Open-ended liquid fund suitable for short-term deployment of funds.
  • Suitable for those with an investment horizon of  1 day to 3 months.
  • Operates on the principles of safety, liquidity and returns where capital preservation is of utmost importance.
  • It is an ideal investment avenue for very short-term parking of excess liquidity.

11. BOI AXA Arbitrage Fund

  • An open-ended scheme investing in arbitrage opportunities between cash and futures prices of exchange traded equities.
  • Suitable for those with an investment horizon of  3 to 6 months.
  • Enjoys similar risk-return profile as liquid fund with tax advantage of an equity fund - Opportunity for Superior post tax returns as compared to a Liquid Fund.
  • All positions are completely hedged – No directional exposure to equity markets; hence Arbitrage Funds carry no Market Risk

Close Ended Schemes:


1. BOI AXA Capital Protection Oriented Fund – Series 5

  • The investment objective of Capital Protection Oriented Funds is to seek capital protection on maturity by investing in fixed income securities maturing on or before the tenure of the scheme and seeking capital appreciation by investing in equity and equity related instruments.However, there is no assurance that the investment objective of the Scheme will be realized and the Scheme does not assure or guarantee any returns. The Scheme is "oriented towards protection of capital" and not "with guaranteed returns". Further, the orientation towards protection of the capital originates from the portfolio structure of the scheme and not from any bank guarantee, insurance cover etc.

2. BOI AXA Midcap Tax Fund – Series 1

3. BOI AXA Midcap Tax Fund – Series 2

  • Close-ended Equity Linked Savings Scheme (ELSS).
  • The investment objective of the Scheme is to generate capital appreciation over a period of ten years by investing predominantly in equity and equity-related securities of midcap companies along with income tax benefit. However, there is no assurance that the investment objective of the Schemes will be realized and the Schemes does not assure or guarantee any returns.
  • This product is suitable for investors who are seeking capital appreciation over a period of 10 years coupled with income tax benefit u/s 80C of the Income Tax Act, 1961.

HOW TO INVEST

There are various ways to invest in our schemes:

  • Physical submission of Applications at our customer service centers
  • Paperless through our website www.boiaxamf.com
  • Invest through SMS Click Here
  • Through Registered Investment Advisors /AMFI certified Distributors
  • BSE and NSE platforms

Physical Submission:

The completed application form with relevant mandatory documents can be submitted at any of our Branches or authorized branches of Karvy computer share ltd. (our Registrars) located at various parts of the country. The application can be downloaded from the Investor Corner Transaction Related section of our website http://www.boiaxamf.com/investor-corner#t3 . The list of branches/point of acceptance is available in the following link (http://www.boiaxamf.com/branch-locator)

Paperless through our website:

We have a facility to Invest Online without uploading/submitting any documents. The pre-requisite for online investment for New Investors are

  • Email ID
  • Mobile number
  • Valid KYC (Know your customer) or Valid CKYC (Central KYC) with 14 digit KIN (KYC Identification number).

Before proceeding, the Investor should have the following details for ease of transaction

  • Aadhar Number
  • PAN Number 
  • Bank account details

If everything is available handy, it simply takes 5 minutes to complete the transaction. Any documents/information that may be required by SEBI/ Govt. of India from time to time.

Invest through SMS

The existing Investor who has a folio number can invest through SMS facility by registering themselves with us. You need to fill the required form and submit it with any of our branches. After registration, that will be informed, the investor can start transacting through SMS using Codes. For SMS registration form Click Here

Through Registered Entities

Investors can also invest through AMFI registered Distributors who have enrolled with us as Distributors for our funds and through Registered Investment Advisors with SEBI. 

BSE & NSE Platforms

For the Investors who wants to invest through DEMAT mode, can approach their Brokers to transact through the stock exchanges Mutual fund Platforms. The intermediaries who have taken license to operate the platforms can also accept for physical or for DEMAT mode. The following are the platforms available for transaction with respective stock exchanges:

Stock Exchange

Name of the Platforms

National Stock Exchange (NSE)

MFSS

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NMF II

Bombay Stock Exchange (BSE)

BSE STAR

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