Q.1. What is a mutual fund?

ANS. A mutual fund is a professionally managed investment fund that pools money from many investors to invest in securities like stocks, bonds, or money market instruments. Each investor owns units of the fund, which represent a portion of its holdings.

Q.2. How do mutual funds work?

ANS. When you invest in a mutual fund, your money is combined with other investors’ money. A professional fund manager uses that pool to buy securities. The gains or losses (after deducting fees) are shared proportionally based on the number of units you hold.

Q.3. Why should I invest in mutual funds?

ANS.

• Diversification: Spread your risk across various assets.

• Professional management: Experts manage the portfolio.

• Liquidity: Easy to buy or redeem (except ELSS and closed-ended schemes).

• Affordability: Start with as low as ₹100 or ₹500 (in SIPs).

• Transparency & Regulation: Regular reporting and SEBI oversight.

Q.4. What are the types of mutual funds?

ANS.

• Equity Funds – Invest mainly in stocks. Higher risk, higher return potential.

• Debt Funds – Invest in bonds and fixed-income instruments. Lower risk.

• Hybrid Funds – Mix of equity and debt.

• ELSS (Tax-saving funds) – Equity funds with a 3-year lock-in under Sec 80C.

• Index Funds/ETFs – Track a market index.

Q.5. What is a SIP?

ANS. SIP (Systematic Investment Plan) allows you to invest a fixed amount regularly (e.g., monthly), helping in rupee cost averaging and instilling financial discipline.

Q.6. Is there any lock-in period?

ANS.

• Open-ended funds: No lock-in (except ELSS).

• ELSS: 3 years lock-in.

• Closed-ended funds: Locked until maturity.

Q.7. How is my investment valued?

ANS. Mutual funds declare a NAV (Net Asset Value) daily. It reflects the per-unit market value of the fund's assets minus liabilities.

Q.8. What are the charges or fees involved?

ANS.

• Expense Ratio: Annual management fee (~0.5% to 2.5%).

• Exit Load: Penalty for early withdrawal (usually within 1 year).

Q.9. Can I lose money in mutual funds?

ANS. Yes. Mutual funds are subject to market risks. Equity funds may fluctuate significantly. However, over the long term, they can potentially generate good returns.

Q.10. How are mutual funds taxed?

ANS.

• Equity Funds:

  • STCG (≤ 1 year): 15%

  • LTCG (> 1 year): 10% (after ₹1 lakh exemption)

• Debt Funds (as of FY 2023-24): Taxed as per your income slab (no indexation).

Q.11. What documents do I need to start investing?

ANS.

• PAN card

• Aadhaar (for KYC)

• Bank details (cancelled cheque)

• Mobile/email for OTP

Q.12. Can I set goals using mutual funds?

ANS. Yes. You can use SIPs to save for:

• Retirement

• Child’s education

• Buying a house

• Emergency corpus

Goal-based investing is a powerful use of mutual funds.

Q.13. Is it safe to invest in mutual funds online?

ANS. Yes, as long as you use:

• SEBI-registered platforms

• Official AMC websites

• Secure personal devices and connections

Q.14. What should I consider before choosing a fund?

ANS.

• Investment objective & time horizon

• Risk tolerance

• Fund performance (past ≠ future)

• Expense ratio

• Fund manager reputation

Q.15. What happens if the fund house shuts down?

ANS. Investor money is held in a trust, separate from the AMC. SEBI regulations ensure investors' interests are protected even in such cases.