Mutual Funds are financial instruments. These funds are collective investments which gather money from different investors to invest in stocks, short-term money market financial instruments, bonds and other securities. The Securities Exchange Board of India regulates the Mutual Funds in India. The unit value of the Mutual Funds in India is known as net asset value per share (NAV). The NAV is calculated on the total amount of the Mutual Funds in India, by dividing it with the number of units issued and outstanding units on daily basis.
The rationale for investments in Mutual Fund (MF) asset class is the following:
• India is one of the fastest growing economies of the world
• Policies in India are compliant and compatible with World Trade Organization (WTO) and have strong economic foundation
• Young demography and rapidly changing lifestyle
• Robust banking system
• Various tax benefits such as long-term capital gains are at lower tax rates, short-term capital gains are at a modest rate
Our key criteria in selecting Mutual Fund House and monitoring a fund are as follows:
• Ensure the MF meets with your investment strategy and financial goals
• Diversify further by investing in a mix of large cap, small cap and mid cap, thematic funds, diversified equity, equity linked savings scheme (ELSS) and Indexed funds
• Systematic Investment Plan (SIP) that requires periodic investment in a fund
• Compound your returns by investing in Growth option instead of re-investing dividends earned on MF.
• We do quarterly review and switch funds, if required, to another MF which can give higher returns
• Continuously monitor performance i.e. compare the scheme’s return against its benchmark returns.
• In an actively managed equity portfolio, one needs to give time to the fund managers to generate return on the portfolio. A tried and tested time-frame for reviewing a MF could be anywhere between 24-30 months.