Entry Load - Exit Load

Entry Load: Mutual Funds charge investors an entry load of up to 2.25% to compensate for distribution costs. It is charged at the time an investor purchases the units of a scheme.

Exit Load: The commission or charge paid when an investor exits from a mutual fund. They are basically imposed to discourage withdrawals.

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Capital Gains Tax

At the time of Sale of any Asset, tax is liable to be paidon the gains earned on the sale of Asset. Such Gains could either be Short Term or Long Term. The Clssification for the same for Assets other than Shares and Mutual Funds are as follows,

1. Short Term Capital Gain (STCG): If the Asset is held for less than 36 Months
2. Long Term Capital Gain (LTCG): If the Asset is held for more than 36 Months

Classification for Sell of Shares or Mutual Funds:

1. Short Term Capital Gain (STCG): If the Asset is held for less than 12 Months
2. Long Term Capital Gain (LTCG): If the Asset is held for more than 12 Months

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Debt Funds

Debt funds are mutual funds that invest in fixed income securities like bonds and treasury bills. Gilt fund, monthly income plans, short term plans, liquid funds, and fixed maturity plans are some of the investment options in debt funds. Apart from these categories, debt funds include various funds investing in short term, medium term and long term bonds.
Debt funds are preferred by individuals who are not willing to invest in a highly volatile equity market. A debt fund provides a steady but low income relative to equity. It is comparatively less volatile.

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Fixed Maturity Plan

FIXED MATURITY PLANS (FMPs) are similar to bank fixed deposit in that they offer a fixed return for a specific tenure. The difference is that they are mutual fund schemes. These closed-ended debt schemes are structured in such a way that the duration of the debt papers that form part of the scheme’s portfolio are aligned with the tenure of the overall scheme. The drawback, or rather a constraint, is liquidity as an investor cannot withdraw funds before the due date. The biggest attraction of FMPs was the tax arbitrage they enjoyed over bank deposits. 

For Example – If an individual invested in a 13 month bank deposit offering a rate of 9% pa, he would earn Rs. 9,750 over a period of 13 months and the effective post tax return (assuming the individual falls in the 30% tax bracket) would be Rs. 6,825. If the same amount was invested in an FMP of the same rate (9% pa), his earning would have Rs. 9,750, same as a bank FD but the effective post tax return would have been Rs. 9,632. Thus, as you can seen, in the case of an FD, the tax payable would be Rs. 2,925 and for an FMP it was merely Rs. 118, offering investors a clear saving of Rs. 2,807 in terms of tax outgo.

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Franklin Templeton MF declares dividend

Franklin Templeton Mutual Fund has announced dividend under the following schemes. The record date for declaration of dividend is September 27, 2013.

Templeton India Income Fund - Dividend Plan & Direct - Dividend option: Individuals & HUF: 0.13,1 Others: 0.111
Templeton India Income Builder Account - Plan A & B - Quarterly Dividend Option & Plan A - Direct - Quarterly Dividend Option: Individuals & HUF: 0.175, Others: 0.149
Templeton India Income Builder Account - Plan A & B - Half Yearly Dividend Option & Plan A - Direct - Half yearly Dividend Option: Individuals & HUF: 0.306, Others: 0.261
Templeton India Government Securities Fund - Composite Plan - Dividend Plan & Direct - Dividend Option: Individuals & HUF: 0.043, Others: 0.037
Templeton India Government Securities Fund - Long Term Plan - Dividend Plan & Direct - Dividend Option: Individuals & HUF: 0.043, Others: 0.037
Templeton India Government Securities Fund - Treasury Plan - Dividend Plan & Direct - Dividend Option: Individuals & HUF: 0.052, Others: 0.044
Templeton India Short Term Income Plan - Retail Plan - Quarterly Dividend Option & Direct Plan - Quarterly Dividend Option: Individuals & HUF: 17.518, Others: 14.926
Templeton Floating Rate Income Fund - Retail Plan - Dividend Option & Direct -Dividend Option: Individuals & HUF: 0.175, Others: 0.149
Templeton India Low Duration Fund - Retail Plan - Quarterly Dividend Plan & Direct - Quarterly Dividend Option: Individuals & HUF: 0.153, Others: 0.130
FT India Monthly Income Plan-Plan A & B - Quarterly Dividend Option & Plan A - Direct - Quarterly Dividend Option: Individuals & HUF: 0.131, Others: 0.111
FT India Life Stage Fund of Funds - 50s Plus Plan - Dividend Plan & 50s Plus Plan - Direct - dividend Option: Individuals & HUF: 0.131, Others: 0.111
FT India Life Stage Fund of Funds - 50s Plus Floating Rate Plan - Dividend Plan & 50s Plus Floating Rate Plan - Direct - dividend Option: Individuals & HUF: 0.131, Others: 0.111

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Fund to Buy: Birla Sun Life Frontline Equity Fund - Plan A (G)

Investment Objective: An open-ended growth scheme with the objective of long term growth of capital, through a portfolio with a target allocation of 100% equity by aiming at being as diversified across various industries and or sectors as its chosen benchmark index, BSE 200.
Fund Type: Open-Ended
Investment Plan: Growth
Launch date: Aug 30, 2002
Benchmark: S&P BSE 200
Asset Size (Rs cr): 2,935.67 (Dec-31-2012)
Minimum Investment: Rs.5000
Fund Manager: Mahesh Patil
Exit Load: 1.00%
Load Comments: Exit Load of 1% if redeemed within 365 Days from the date of allotment.
Website: http://www.birlasunlife.com

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Why Invest in Mutual Fund?

Mutual Fund can be defined as an investment company that acquires funds from investors, and then invests the money in a diversified portfolio of investment securities. The mutual fund will have a fund manager who is responsible for investing the pooled money into specific securities. When you invest in a mutual fund, you are buying shares of the mutual fund and become a shareholder of the fund. Each scheme of a mutual fund can have different character and objectives. Mutual funds issue units to the investors, which represent an equitable right in the assets of the mutual fund.

If you do not want to go in for a risky venture and have security for the amount invested. You would want to maximize your returns on investment. or if you may not have the time or knowledge to actively manage your money. In this case, you would want a professionally managed firm to look after your investment needs and spend in profitable avenues. Mutual funds offer a safer way to reach your goals.They are a convenient and cost effective method of obtaining diversification and professional management. They generally buy and sell securities in volume, which allows investors to benefit from lower trading, management and research costs. Fund performance is subject to frequent reviews by various publications and rating agencies, making it possible for investors to conduct direct comparisons between funds.

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Classification of Mutual Funds

By Structure:

1. Open-ended scheme
2. Closed-ended scheme
3. Interval schemes

 By Investment Objective:

1. Growth schemes
2. Income schemes
3. Balanced schemes
4. Money Market schemes

Other Schemes:

1. Tax saving schemes
2. Special schemes
3. Index schemes
4. Sector specific schemes

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Mutual Fund Flow Chart

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Regional Mutual Fund

Regional mutual fund is a mutual fund that confines itself to investments in securities from a specified geographical area, such as Europe or Asia. A regional mutual fund will generally look to own a diversified portfolio of companies based in and operating out of its specified geographical area. The objective is to take advantage of regional growth potential before the national investment community does. They may be some regional funds whose objective is to invest in a specific segment of the region's economy, such as banking, energy etc.

For the investor, the primary benefit of a regional fund is that he/she increases his/her diversification by being exposed to a specific foreign geographical area. For the average investor, these funds are beneficial as most investors don't have enough capital to adequately diversify themselves across many investments in the region. Regional funds select securities that pass geographical criteria. Regional funds differ from the international mutual funds in the sense that international mutual funds have a diversified portfolio with investment spanning all across the world, where as regional funds invest in companies in one specific region or nation. Regional funds carry more risk as compared to international mutual funds because their investments are less diversified geographically.

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No Load Fund

Normally Mutual funds can be classified into two types - Load mutual funds and No-Load mutual funds. No Load Fund is a mutual fund in which shares are sold without a commission or sales charge. The reason for this is that the shares are distributed directly by the investment company, instead of going through a secondary party. This is the opposite of a load fund, which charges a commission at the time of the fund's purchase, at the time of its sale, or as a "level-load" for as long as the investor holds the fund.

No load funds have several advantages over load funds. Firstly, funds with loads, on average, consistently under perform no-load funds when the load is taken into consideration in performance calculations. Secondly, loads understate the real commission charged because they reduce the total amount being invested. Finally, when a load fund is held over a long time period, the effect of the load, if paid up front, is not diminished because if the money paid for the load had been invested, as in a no-load fund, it would have been compounding over the whole time period.

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Money Market Fund

A money market fund is a mutual fund that invests solely in money market instruments. Money market instruments are forms of debt that mature in less than one year and are very liquid. Treasury bills make up the bulk of the money market instruments. Securities in the money market are relatively risk-free. Money market funds are generally the safest and most secure of mutual fund investments. The goal of a money-market fund is to preserve principal while yielding a modest return. Money-market mutual fund is akin to a high-yield bank account but is not entirely risk free. When investing in a money-market fund, attention should be paid to the interest rate that is being offered.

Money market funds are of two types:

1. Institutional Money Market Mutual Funds: These funds are held by governments, institutional investors and businesses etc. Huge sum of money is parked in institutional money funds.

2. Retail Money Market Mutual Funds: Retail money market funds are used for parking money temporarily. The investment portfolio of money market funds comprises of treasury bills, short term debts, tax free bonds etc.

Money market mutual funds are one of the safest instruments of investment for the retail low income investor. The assets in a money market fund are invested in safe and stable instruments of investment issued by governments, banks and corporations etc.

Generally, money market instruments require huge amount of investments and it is beyond the capacity of an ordinary retail investor to invest such large sums. Money market funds allow retail investors the opportunity of investing in money market instrument and benefit from the price advantage. Money market mutual funds are usually rated by the rating agencies. So, check for the fund ratings before investing.

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International Mutual Fund

International mutual funds are those funds that invest in non-domestic securities markets throughout the world. Investing in international markets provides greater portfolio diversification and let you capitalize on some of the world's best opportunities. If investments are chosen carefully, international mutual fund may be profitable when some markets are rising and others are declining. However, fund managers need to keep close watch on foreign currencies and world markets as profitable investments in a rising market can lose money if the foreign currency rises against the dollar. In recent years international mutual funds have gained popularity. This can be attributed to removal of trade barriers and expansion of economies, which has sparked off growth in various regions of the world.

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Fund of Funds

A fund of funds (FoF) is an investment strategy of holding a portfolio of other investment funds rather than investing directly in shares, bonds or other securities. This type of investment is also known as multi-manager investment. There are different types of 'fund of funds', each investing in a different type of collective investment scheme, for  example 'mutual fund' FoF, hedge fund FoF, private equity FoF or investment trust FoF. Investing in a collective investment scheme may increase diversity compared to a small investor holding a smaller range of securities directly. A FoF manager will try to select the best performing funds to invest in based upon the managers past performance and other factors. If the FoF manager is skillful, this additional level of selection can provide greater stability and take on some of the risk relating to the decisions of a single manager. As in all other areas of investing, there are no guarantees for regular returns. As a fund of funds invests in the scheme of other funds, it provides a greater degree of diversification. Instead of investing in different stocks of mutual funds and keeping records of all of them, it is much easier to invest and track only one fund which in turn invests in other mutual funds.

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