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India is home to 17.5% of the world's population and according to a survey conducted by Standard & Poor's, over 76% of Indian adults lack basic financial literacy and they don't understand the most basic and key financial concepts.

According to a survey on Global Financial Literacy in 2012 conducted by VISA, only 35% of Indians were financially literate and India was among the least financially literate countries. It demonstrated that "India is lagging behind the global standard and it secured the 23rd slot in the overall ranking."

It's been more than 70 years since we have got independence but to a maximum population of rural areas, financial literacy is still a distant reality.

Financial literacy is not an age bound concept. It should be inculcated right from childhood. The little concept of depositing small amounts of money in a piggy bank is in itself an important lesson. The best practice would be introducing the concept of money in the home only because it is a provocative topic and may expose the children to absorption of wrong perceptions about money management, many a time resulting in the formation of bad money habits from the foundation stage itself.

It is not certain that only poor and uneducated lack financial literacy. Even the rich and educated suffer from financial illiteracy which results in unproductive investment decisions. Financial literacy is the need for all sections of society.

One of the most important segments of our society is women. Financially educating women generates a multiplier effect in having a substantial impact on disseminating financial literacy to future generations. This will, in turn, encourage a rise in women's foray into the workforce and yield success for the Indian economy.

We require a consolidated effort by banks, government, various financial institutions, and insurance companies to tackle this problem.

Being one of the leading Asset Management Companies in India, this book, the Constitution of Investing is our humble contribution towards Financial Literacy that would enhance one’s knowledge on the basic fundamentals of Mutual Funds.

Happy Reading!


Mr. AK Narayan

CA & Financial planner

Mr. Ashish Shah

MD Wealth First Portfolio Manager Limited

Ms. Mona Fakih

Founder - Allegiance Advisors

Mr. Sadashiv Phene

Financial Planner

Mr. Vijay Venkatram

Managing Director - Wealth Forum

Mr. Vasant Kulkarni

Investment Advisor & Contributor on
Investing in Marathi daily - Loksatta


Most of us have financial goals that we plan to achieve. We have goals such as buying a home, children's education and planning for a happy retirement. We dutifully keep saving our hard-earned money to achieve these goals. As advised by our elders, we try best to follow their advice of saving before we spend.

Note: The above table is for illustration purpose only. It is assumed that this interest earned is over and above of deduction available as per provision of Section 80 TTA. Assuming that Individual and HUF having taxable income of less than Rs. 50 Lac and falling in highest tax rate bracket

Which is why, it is better to be smart investor than just being a diciplined investor.

Take the example of price of petrol. Cost of 1 litre of petrol in 2019 is ₹ 76.90 whereas the same cost in 1990 was ₹ 12.23. So, you can clearly see that how the price of petrol has gone up by 6 times in 29 years.

Source: CIEL Research,,,

Which is why, it is better to be smart investor than just being a disciplined investor.

Smart Investor

Assuming, you retire at the age of 60 and have a monthly expense of ₹ 1 lakh. With 7% inflation, this amount almost doubles every 10 years. Therefore, it is very important to invest wisely and ensure that your investment corpus beats inflation.

While all the above are different investment options, some of these options have longer lock-in periods and their returns are taxable. The returns on these investments may not beat inflation as well. Stock markets and mutual funds are investments that have the potential to beat inflation and give good returns over a period of time. However, people tend to stay away from stock markets due to the volatility and ups and downs which at times also degrades the value of investment. In such cases, the ideal option is to go for mutual funds. However, investments in mutual funds can be volatile in the short term. But the key to creating wealth through mutual funds is to stay invested for the long term and not to let market ups and downs bother you as explained in the illustration.

So, it is very clear through the above illustration that inspite of market ups and downs in the short term, staying invested and being patient with your investments has paid off in the long term.

Now, let us understand what are mutual funds, the benefits and risks associated with mutual funds.

Mutual fund is a pool of money accumulated by several investors who aim at saving and making money through their investment. The corpus of money created is invested in various asset classes like Equity, Debt, Gold etc.

The primary advantage of mutual funds are that they provide a higher level of diversification, liquidity, they are managed by professional experts and are relatively low cost.


Mutual Fund professionals manage your hard earned money with their skills and experience. They have a qualified research team that assists them by analyzing the performance and potential of various companies. Fund managers are qualified to manage your funds in a manner that they endeavour to yield higher returns on investments.


Mutual funds are required to disclose their portfolio, performance, expense ratio etc periodically which makes it easier for investors to compare one fund with the other.


Mutual funds are required to disclose their portfolio, performance, expense ratio etc periodically which makes it easier for investors to compare one fund with the other.


As per the regulations by The Securities and Exchange Board of India (SEBI), all mutual fund companies are required to register with SEBI, as they are obliged to adhere to the strict regulations formulated to safeguard investors. The overall trading operations are monitored by SEBI.


You can invest into mutual funds with small amounts as less as 100 through a Systematic investment plan. This feature is very beneficial for investors who do not have a lumpsum amount but find it convenient to save smaller amounts at regular intervals.


Funds are relatively low-cost as compared to other investments options available.


At times the prices or yields of all the securities in a particular market rise or fall due to broad outside influences. This change in price is due to 'market risk'.


Sometimes referred to as 'loss of purchasing power'. Whenever the rate of inflation exceeds the earnings on your investment, you run the risk that you'll actually be able to buy less, not more.


In short, how stable is the company or entity to which you lend your money when you invest? How certain are you that it will be able to pay the interest you are promised, or repay your principal when the investment matures?


Interest rate movements in the Indian debt markets can be volatile leading to the possibility of large price movements up or down in debt and money market securities and thereby to possibly large movements in the Net Asset Value (NAV).

Mutual funds are broadly classified into Equity, Debt, Hybrid, Solution Oriented schemes etc. Further, there are different categories of funds within debt and equity depending on the investors risk taking ability. Different funds have a different risk-return ratio. Lets look at the below illustration and understand this further.

Debt funds invest in Government bonds, Company Debentures and Fixed Income Assets. As they invest in fixed income instruments, they are a relatively safe investment option.

Types of Debt/Debt Oriented Hybrid Funds


Liquid funds are kind of Debt funds that are considered to be a quite safe investment option. Liquid funds invest in securities with very low residual maturity. Liquid funds are ideal for short term goals such as parking idle money, contingency planning etc. Liquid funds, given its investment in low maturity instruments, carry very low duration risk.


Ultra short duration funds invest in fixed-income instruments and have short-term maturities but higher than liquid funds. These funds carry low interest rate risks and aim to offer better returns then liquid funds.


These mutual funds usually invest in short duration fixed income instruments such that macaulay duration of the portfolio is between 1 to 3 years. People who are planning a foreign vacation, planning to park pre-retirement corpus or purchase consumer durables can consider short duration funds.


Gilt Funds are mutual fund schemes which primarily invest in Government Securities (Gilts). Government Securities includes securities issued by Central and State Government. Though Gilt funds invest in government securities(G-Sec) which have no credit risk, they carry an interest rate risk.


The conservative hybrid category of mutual funds invests the majority of the corpus in the debt instruments while a smaller proportion is invested in equities to earn capital gains. In general, conservative hybrid mutual funds allocate 75-90% of the corpus in fixed income securities and the rest in equities. As the allocation in debt is very high, the risk is lower in such schemes. These funds can be chosen by conservative investors who want stability of debt and also want to benefit from upside potential of equities.


Overnight Funds are open-ended debt mutual fund schemes that invest in overnight securities that matures in a day. This means that the fund manager buys securities on a daily basis in these schemes. These securities mature in a day and the entire cash is deployed in buying new securities. Overnight funds are touted as the safest among the debt mutual fund categories. This is because due to their very short maturity, these schemes are not impacted by interest rate changes and defaults in securities. Overnight funds carry negligible risk and are meant for investors who want to park a huge sum for a short time.


A money market mutual fund (MMF) is a type of mutual fund that invests in short-term debt and money market instruments with residual maturity upto 12 months, cash, and cash equivalents. Though not exactly as safe as cash, money market funds are considered extremely low-risk on the investment spectrum. A money market fund generates income, but little capital appreciation.

Money market mutual funds offer a convenient parking place for cash reserves when an investor is not quite ready to make an investment or is anticipating a near-term cash outlay for a non-investment purpose. Money market mutual funds offer relative safety and liquidity. This means that investors will have an expected sum of cash at the very moment that they need it.

These funds invest into equity stocks or shares of a company. They aim to provide higher returns, therefore they are considered to be high-risk funds

Types of Equity/Equity Oriented Hybrid Funds:


These mutual funds fall into the aggressive hybrid category and invest in both equity and debt. However, focus on stocks is higher with 65-80% of total investments rest in debt. Because of this, the conservative hybrid funds offer equity taxation.These funds are ideal for investors who want a moderate risk looking for returns of equity along with stability of debt. Equity hybrid funds are comparatively less risker than pure equity funds.


  • Large-Cap Funds – which invest a minimum of 80% of their total assets in equity and equity related instruments of large-cap companies (the top 100 cos. in terms of market capitalisation). These schemes are considered to be more stable than the mid-cap or small-cap funds.
  • Mid-Cap Funds – which invest atleast 65% of their total assets in equity and equity related instruments of mid-cap companies (101-250th placed companies according to market capitalization). These schemes tend to offer better returns than the large-cap schemes but are also more volatile than them.
  • Small-Cap Funds – which invest atleast 65% of their total assets in equity and equity related instruments of small-cap companies (251st companies onwards in terms of market capitalization). These schemes tend to offer great returns than the large-cap and mid-cap schemes but are also highly volatile.
  • Multi-Cap Funds – which invest atleast 75% of their total assets in equity and equity related instruments with minimum 25% investment in each of large cap, mid cap and small cap companies. These funds offer a blend of growth and stability.
  • Flexi Cap Funds - which invest around 65% of their total assets in equity and equity related instruments of large-cap, mid-cap and small-cap companies in varying proportions. In these schemes, the fund manager keeps rebalancing the portfolio to match the market and economic conditions as well as the investment objective of the scheme.
  • Large and Mid-Cap Funds – which invest atleast 35% of their total assets in equity and equity related instruments of mid-cap companies and large-cap companies each. These schemes offer a great blend of lower volatility and better returns.


Traditional tax saving products are fixed income products which offer regular income with typically a large lock-in period. You could consider ELSS (Equity Linked Savings Scheme}. It is a tax saving mutual fund scheme that predominantly invests in equity, hence, providing scope for capital appreciation. ELSS provides tax benefits under Section 80C for investments up to 1.5 lakhs each financial year. Individuals/HUF are entitled to an aggregate deduction of 1.5 lakhs from the gross total income for investments in an ELSS scheme during the relevant financial year. Investment in ELSS schemes has one of the lowest lock-in period of 3 years amongst other tax saving options.


A sectoral fund is a fund that invests solely in businesses that operate in a particular industry or sector of the economy. Sectoral funds offer the advantage of diversification vs direct equities through multiple holdings in a portfolio. However, overall sector funds carry risks that affect the entire portfolio due to their targeted sector exposure. Sectoral funds and themes are usually recommended to highly informed investors who have a long term view of the particular sector.


Arbitrage funds are type of mutual fund that buy in one market and sell in another simultaneously to take advantage of a temporary price differential which is called arbitrage. More specifically, Arbitrage funds exploit the price differences between current and future securities to generate returns. The fund manager simultaneously buys shares in the cash market and sells it in futures or derivatives market. The difference in the cost price and selling price is the return the fund earns. Suppose the equity share of a company ABC trades in the cash market at Rs. 1220 and in the future market at Rs.1235. The fund manager buys ABC share from cash market at Rs 1220 and

in the future market at Rs.1235. The fund manager buys ABC share from cash market at Rs 1220 and sorts a futures contract to sell the shares at Rs 1235. Towards the end of the month when the prices coincide, the fund manager will sell the shares in the futures market and generate a risk-free profit of Rs.15/- per share less transaction costs. (This example is for illustration purposes only) Arbitrage funds tend to be a safe option for the risk-averse individuals to park their surplus money, when there is a persistent fluctuation in the market.


An index is a group of securities defining a market segment. Examples – Sensex or Nifty50. An index fund endeavours to imitate the portfolio of an index at all times. For example, when an index fund tracks a benchmark like the Nifty, its portfolio will have the 50 stocks that comprise Nifty, in the exact same proportions. NAV of an index fund moves virtually in line with the index it tracks. If the Nifty rises 10 per cent in a month, the NAV of a Nifty-linked index fund may also roughly appreciate 10 per cent over the same period. If the Nifty drops 10 per cent, so will the NAV of the index fund. There can be minor deviation in returns from the benchmark which is termed as tracking error. Since index funds replicate the composition of the underlying benchmark, these are said to be passively managed and hence typically charge much lesser fees compared to the 'active funds' where the fund managers constantly fine-tune the portfolios as per changing market scenario; basis lots of research and analysis. Index funds are therefore considered suitable for investors who are risk averse, are comfortable being at par with index returns, and are cost conscious.

Now that, we are clear about the difference between savings and investments, let us look at the right way to invest our money.

Every investment should be made with a goal in mind. We all have different kinds of goals and mutual funds may help us achieve these goals. Goals can broadly be classified into short, medium and long term goals.

The above illustration clearly showcases how different life goals that need to be achieved at specific periods of time can be smoothly done through different types of mutual funds.

Very Short Term Goals:

These are goals that one plans to achieve in less than l year time span. These goals include things like buying a new mobile phone, emergency money for any contingency, money to be parked before deciding the next investment. Liquid Mutual funds are ideal for very short term goals as they are quite safe and offer a moderate rate of return.

Short Term Goals:

These goals range from a period of l year to 3 years. Purchase of durables, planning for a vacation, parking of pre-retirement corpus are few examples of short term goals. Debt mutual funds are an ideal investment for achieving short term goals. Debt mutual funds are less risky and offer a stable return on investments.

Medium Term Goals:

Goals that an individual plans to achieve in 3-6 years are classified as medium term goals. These include goals such as buying a new car, a new house or funding a startup. Equity hybrid funds can be considered to acheive such type of goals. These funds invest into a mix of equity and debt. Equity provides the returns whereas Debt provides stability.

Long Term Goals:

Goals such as buying a second home, child's education, child's marriage are long term goals. Diversified equity mutual funds are ideal investment for such kind of goals. Though there is a possibility of volatility in the short term, these funds aim to offer positive returns over a period of time.

Very Long Term Goals:

Goals which one would like achieve over a 10 year period are classified as very long term goals. Small caps, mid caps, and sectoral funds can be considred to achieve these goals. Creating wealth for the next generation, planning for a childs future, planning for retirement are some of the goals that one can achieve through prudent planning.

One of the key benefits of investing into Mutual funds is that it instills a sense of discipline. It helps you form a good habit through systematic investing. Mutual Funds offer an amazing feature whereby you can invest small amounts through a Systematic Investment Plan (SIP) Through a SIP, you can regularly invest a fixed amount at periodical intervals of time in a Mutual fund scheme. You can invest monthly, quarterly or daily through a SIP. There are multiple benefits of investing through a SIP.

Lets look at the illustration below:

Benefits of Starting Early

So, you can see that the illustration clearly shows that an amount of 1000 invested at the age of 25 assuming a return of 8% p.a. can give you a return of almost 5 times as compared to the the same amount invested at the year of 40. The sooner you start, the faster your money grows.

Rupee Cost Averaging

One of the key benefits of investing in Mutual funds is that you don't need to time the market. Any time is a good time to start investing through SIP. The illustration clearly shows that units are accumulated every month inspite of the fall or rise in NAV. When the NAV is low, you accumulate more units and when the NAV is high, you accumulate fewer units. This averages out your cost and you aim to benefit in the long term.

There can be no better way to explain the power of compounding other than the above example. The king of an empire was very impressed by a poetry of a poor farmer who was barely making ends meet. The king was so happy that he asked the farmer to choose his own reward. The farmer humbly asked for a grain of rice to be placed on the block of the chess board and the same to be doubled in every subsequent block. The king found the farmer’s ask very funny, yet ordered his people to start the process. When they reached the 16th block, there were 32,788 grains of rice on the chess board and by the 24th block, there were 8 million grains of rice. It is said that the king had to surrender his entire kingdom to the farmer to pay his reward. This is the benefit that Power of compounding offers.

The woman of today plays many roles and looks to live life to the fullest. However, the same may not be true when it comes to managing her investments and finances.

While on the one hand there are mindset issues that make women shy away from numbers, finances and investing, on the other hand there is a rise in independence, nuclear families and marital issues; that, in a way, push women to take charge of their financial destinies.

Another noteworthy fact is that many financial advisors actually think that women are inherently better investors since they are focussed on their goals, disciplined about their investing, patient with the time taken to accumulate wealth and have strong faith in their advisors. Women, according to these experts, should come forward and take active interest in the financial decisions.

So, go ahead and dive in! And as you do, you will find these pointers helpful:

1. Align your investment to a goal:

This is an important aspect while planning your mutual fund investments. Usually people invest randomly when they have a corpus at hand or they simply invest to beat market returns and make more money than traditional instruments. However, one key aspect to be kept in mind is to have an investment for every goal. Every goal that must be achieved should have a time horizon and the value attached so that you can plan your investments accordingly. Once you start approaching your goal (like retirement), the money can be moved to little safer investments like debt funds so that market volatility does not affect your investments much at the time of realising your goals.It should also be noted that while the regular inflation is around 5 %, the education inflation is growing at a much higher rate Therefore, investments for children’s education need to be planned as comprehensively and early as possible.

2. Have a Contingency Fund:

Since all investments are supposed to be aligned to goals and therefore should not be redeemed till the goals are achieved, it is very important to have a contingency fund for emergencies. The corpus in this fund can be withdrawn in case of an emergency.

3. Your money always has to beat inflation:

This is a very important aspect that women need to keep in mind while planning their investments. It applies to not just the money that is invested but also the cash and idle balances that we hold. It is therefore better to move your idle money from traditional investments and park the same in liquid funds and aim for better returns till the time the funds are actually used.

4. Save tax systematically:

Tax saving is one of the important aspects that need to be considered by women. It is neither advisable nor smart to run around at the last minute for tax saving. Tax planning can be done intelligently through Systematic Investment Plans (SIP) of small amounts in Equity linked saving funds throughout the year; starting at the begining of the financial year. This reduces the pressure to arrange for a lump sum amount for tax saving in following March. The best part of saving taxes systematically is that while your tax gets saved, you can continue your SIP in the long run which in-turn may lead to parallelly building a retirement corpus. You could also look at a SIP with a combination of free insurance clubbed with it.

5. Get involved in financial discussions happening in the family:

It is critical for women to participate in the financial planning discussions happening in the family right from the beginning along with their husbands/ elders. Quite a few times, women have no choice but to look at their investments in case of any untoward incident. It then becomes very difficult to consolidate and understand the investments made by the husband.

6. A woman goes through many life stages:

As soon as women start working, it is important to start planning for their investments. Women should approach a financial advisor and put a financial plan together.

a. Once a financial plan is in place, all a woman needs to do is to keep investing and just keep adding goals to it and just keep assigning money to each of the goals.

b. Women should start saving small to meet their short-term goals like buying a mobile phone or any other gadget. Quick wins like these will strengthen the faith and commitment to invest in other Longer-term goals.

c. Post marriage, the important thing to be kept in mind is that the investments pre and post marriage should be consolidated, and it should be an either-or survivor arrangement post marriage.

d. Also, post marriage couples usually get into taking up a home and car loan and then for a long period of time they keep servicing these loans. It is always better to start saving first, build up a decent corpus and then go for a loan.

e. Since marriage brings in a whole lot of responsibilities, it is important to start planning for different goals that need to be achieved and accordingly investments need to be made for each of the goals. For e.g. A systematic investment plan for a holiday, for children’s education. It is very important to build in some rewards like a holiday or a foreign travel in your goals to add some spice. You save to enjoy as well and fulfil your aspirations from time to time.

f. As salaries of both the husband and wife increases, it’s better to continue keeping the expenses in check and invest the additional salary through SIPs which help you become financially independent faster. From time to time, the SIPs should be topped up. This helps to beat inflation and takes you closer to your goals.

g. It is also good if women would like to have a separate corpus to be managed by herself that could be used in case of an unforeseen development. That is more of a security for women.

7. Plan for retirement as early as possible:

For a woman who has just started working, while retirement is a far-off goal, it is important to note that retirement has as many non-working years in our life as compared to working years. One needs to stat planning for retirement and build a corpus through Systematic investment plan through investment in various equity schemes as she has a long way to go. Investments can be divided depending on the goal and time frame required to achieve that goal. Planning for retirement also helps in pursuing our hobbies later.

8. Make sure you have adequate term & health insurance:

This is a golden rule to be followed while planning investments. Insurance and investments need to be completely kept separate as both are meant to achieve different goals. Insurance helps the family in case of any eventuality or death of the policy holder. Investments are to grow your wealth while you are alive to meet your long-term goals. Quite a few investors fail to understand this and end up making wrong investment decisions. To conclude, key things to be kept in mind are to start early, have a grip on your goals, plan for retirement, stay invested and don’t break your investments before achieving your goals, top up your SIPs, have separate money assigned to your short-term goals and enjoyment as well.

1. Withdrawing investments before goal is achieved:

Investors start with their investments for the long term and many times keeping a goal in mind. However, one often sees them withdraw their investments before achieving the goal that they had planned for. Impulse purchases, a foreign holiday and other such untimely expenses lead to breaking their investments partially or fully. This mistake should be avoided, and investments should not be redeemed before the goal is achieved. One should not look at mutual fund as an open investment that can be withdrawn anytime but something that should not be redeemed till your goal is achieved. Investing without a goal is like travelling without a destination.

2. Being impatient when markets are choppy:

Investors usually do not like to see their principal amount go down. Which is why, when markets are volatile and they experience some erosion of their capital, investors panic and tend to exit. This is another common mistake investors should avoid. The right approach is to stay invested and be patient across market cycles. The capacity to withstand capital erosion could eventually help investors make money in the long term

3. Not understanding the difference between savings and Investments:

People do not understand the difference between savings and investments. One common mistake people make is that they park their money in traditional investments and feel that their money is invested. If the interest rate and inflation are taken into account, the value of the money in these instruments tend to depreciate over a period of time. People need to understand the difference between savings and investments and consider mutual funds with an aim for wealth creation. Investments in Mutual funds could help beat inflation and help in saving tax over a period of time.

4. Using insurance as investments:

Investors consider that they have sufficient amount of insurance policies that can help them meet their investment goals. They feel that by buying insurance policies, their investment goals are complete. This is one big mistakes investors commit. They need to very clearly understand the difference between insurance and investment and the fact that Insurance is for protection one can consider mutual funds for wealth creation.

5. Timing the market:

Another common mistake mutual fund investors tend to make is that they tend to time their investments to maximise their returns. Some even prefer to sell their investments when the markets appear overpriced. However, this does not work for all investors. Some keep waiting for the markets to correct while others repent as to why they sold their investments at a previous high. Instead, it makes sense to keep investing at regular intervals and let your money grow over a long period of time. It is not the timing but the time in the market that may help you generate returns over the long term.

6. Investing in too many schemes:

This is one of the most common mistakes investors commit, thinking that they are diversifying. They tend to forget that each MF scheme has a diversified portfolio of securities. More schemes you buy, more difficult it becomes to keep a track of them. Instead you should build a portfolio of 5 to 7 well managed schemes and keep adding to your investments.

7. Ignoring risk profiles and asset allocation:

Another common mistake investor’s make is that they get carried away and suffer from a fear of missing out. If markets are doing well and are at their peak, investors ignore their risk profile and asset allocation and invest in risky instruments like equity funds. IF the investor is conservative or a moderate risk taker, he could consider debt funds which invests in fixed income instruments and aim to offer stable returns.

8. Not reviewing your portfolio regularly:

This is another mistake investors commonly make. Ideally, investors should track the performance of their investments at regular intervals. But, most of us fail to do so. However, to avoid obstacles in your wealth creation, in the long run, it is advisable to conduct a periodical review of all your mutual fund schemes. This will help you know the funds in your portfolio that are underperfor -ming and hence you can revise your asset allocation accordingly.

It is very simple to start investing in Mutual Funds. All you need is a bank account and a PAN.

Once the documents are in place, the first step is to complete the KYC (Know your customer) process. PAN and duly filled KYC form is required to complete the KYC process.

You can open a Mutual Fund Account/Folio by investing in the desired scheme/schemes.

You can invest in a mutual fund scheme off-line or online. For investing offline, all you need to do is to fill up the application form and submit a cheque or a DD in the name of the mutual fund scheme.

The documents can be submitted either at the Mutual fund branch or to your Financial Advisor

You can also purchase Mutual funds online through the Mutual fund website or through the website of the distributors.

6. Similarly, mutual fund investments can be withdrawn by filling up a redemption slip and submitting the same to the mutual fund branch or distributor. The same can also be redeemed online

It is very simple to start investing in Mutual Funds. All you need is a bank account and a PAN.


All Mutual fund schemes offer a Direct Plan and Regular plan. You can invest in a Direct Plan without routing the investment through any distributor or agent. Investments through a distributor or a mutual fund agent are Regular Plans. Direct Plans have a separate NAV which is mostly marginally higher than the normal Regular Plans NAV. Direct Plans have a lower expense ratio as there is no distributor/agent involved.


Growth Option:

  • Capital appreciation in the scheme is ploughed back into the scheme
  • Investors do not receive any periodic payments
  • This option is suitable for investors who do not require a regular income

Dividend Option:

  • Capital appreciation in the investment is paid to the investor in the form of dividend
  • Dividend payment is subject to the availability of surplus in the scheme
  • Dividend income is taxable in the hands of investor w.e.f 01.04.2020 and subject to withholding tax as applicable
  • This option is suitable for investors who require regular income


Systematic Transfer Plan allows you to transfer a fixed amount from one scheme to the other at regular intervals. While SIP is the investment of funds from your savings to a mutual fund scheme, STP means transferring funds from one mutual fund scheme to another. For instance, if you invest 'systematically' in equities, you aim to earn better returns even during volatile market scenarios. Here, you can invest a lumpsum amount into one scheme(e.g. Liquid scheme), and transfer a fixed amount to another scheme regularly(e.g. Equity scheme). Through STP, you aim to generate higher returns, because the amount in the source fund also generates returns along with the returns in which funds are being systematically transferred.

STP is a great choice for investors who seek to invest lumpsum but don't want to invest it together.


SWP is a feature that allows you to withdraw a fixed or variable amount from your mutual fund scheme periodically, every month on a fixed date. SWP is suitable for investors who need a fixed income every month. The key benefit of SWP is that the withdrawals are tax efficient as only the capital gains are taxed and subject to withholding tax (Applicable for Non-resident investor) and not the entire amount withdrawn.

Product Label

  • Mutual funds are required to 'label' their schemes on the following parameters:
  • Nature of scheme in an indicative time horizon (short/medium/long term)
  • A brief about the kind of product in which investor is investing (Equity/Debt/Hybrid).
    • Level of risk, depicted by 'Riskometer' as under:
      • -Low - principal at low risk
      • -Low to Moderate - principal at low to moderate risk
      • -Moderate - principal at moderate risk
      • -Moderately High - principal at moderately high risk
      • -High - principal at high risk
      • -Very High - pricipal at a very high risk
    • A disclaimer saying: "Investors should consult their financial advisers if they are not clear about the suitability of the product."

    A fund fact sheet helps you to assess the scheme and keep a track of its performance. The fund fact sheet is easy to understand and provides a snapshot of various schemes.

    The fund fact sheet showcases the NAV, returns, fund manager managing the portfolio, riskometer that gives an indication whether the scheme carries a low, moderate or high risk and other statistics that help you compare mutual funds and decide which ones to invest in.


    NAV (Net Asset Value) is the market value of all the scheme investments, less the liabilities and expenses divided by the outstanding number of units. NAV of a mutual fund scheme is like a share price of a particular stock. NAV is important as it is the basis for valuing an investors holding in a mutual fund scheme. Mutual Fund NAVs are published daily on Mutual Fund websites, AMFI website.


  • Mutual Funds are tax-efficient as compared to other forms of investments
  • Amount invested in Equity Linked Savings Schemes (ELSS) schemes is eligible for Tax deduction u/s 80C upto ₹ 1.5 lakhs#
  • Long term capital gains from Equity Oriented Mutual Funds are exempt upto ₹ 1 lakhs p.a. Gains and above over ₹ 1 lakh are taxable at 10% (+Applicable surcharge and cess)
  • Capital Gains from other than Equity - Oriented Schemes are as follows Short Term Capital Gain (STCG) @ 30%
  • Long Term Capital Gain (LTCG) @ 20% with indexation
  • Note: (A) Investor is individual/HUF (B) Investor is a Tax resident

    #To save tax up to ₹ 46,800: Individual and HUF having taxable income of less than ₹50 Lakhs can invest up to ₹1.5 Lakhs under the ELSS scheme during the FY2020-21 as per provision of Section 80C of the Income Tax Act 1961 (includes applicable cess). Tax saving will be proportionately reduced subject to the taxable income and investments. Further, investment in ELSS schemes is subject to a lock-in period of 3 years from the date of allotment of units. Long Term capital gain, if any on ELSS scheme investment is subject to applicable tax at the time of redemption. The tax benefits are as per the current income tax laws and rules. Investors are advised to consult their tax advisor before investing in such schemes.

    The information being provided in this material is for the sole purpose of creating awareness about Mutual Funds and for their understanding, in general. The views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. Many of the statements and assertions contained in this booklet merely reflect the views, opinions & belief of Nippon Life India Asset Management Limited (NAM India) and therefore Nippon Life India Asset Management Limited (NAM India) does not in any manner guarantee the completeness, efficacy, accuracy or authenticity of such information. This information is not intended to be an offer or solicitation for the purchase or sale of any financial product or instrument. Before making any investments, the readers are advised to seek independent professional advice, verify the contents in order to arrive at an informed investment decision. Neither, the Sponsors, the investment manager, Mutual Fund, the Trustee, their respective directors, nor any person connected with them, accepts any liability arising from the use of this information.


    All Mutual Fund investors have to go through a one-time KYC (know your Customer) process. Investors should deal only with registered mutual funds, to be verified on SEBI website under ‘Intermediaries/ Market Infrastructure Institutions’. For redressal of your complaints, you may please visit For more info on KYC, change in various details & redressal of complaints, NipponIndia-Tax-Saver-ELSS-Fund.aspx

    This is an investor education and awareness initiative by Nippon India Mutual Fund.

    Mutual Fund investments are subject to market risks, read all scheme related documents carefully.