Mutual funds have become an increasingly popular investment option for Indians over the past few years. With more people turning to mutual funds, there has also been an increase in questions related to them. Here is the top frequently asked questions about mutual funds in India.
What is a mutual fund?
A mutual fund is an investment vehicle that pools money from multiple investors to invest in various securities such as stocks, bonds, and other assets. It is managed by a professional fund manager who invests the pooled money in a portfolio of investments, diversifying the risk of the investors.
How does a mutual fund work?
A mutual fund collects money from multiple investors and invests it in a diversified portfolio of securities. The returns generated from these investments are distributed among the investors in proportion to their investments. What are the different types of mutual funds?
There are various types of mutual funds such as equity funds, debt funds, hybrid funds, sector funds, index funds, and more. Each type of fund invests in different asset classes and follows a different investment strategy.
What is the minimum investment required to start investing in mutual funds?
The minimum investment required to start investing in mutual funds in India can vary from one fund to another. It can range from as low as Rs. 500 to as high as Rs. 5,000 or more.
How are mutual fund returns taxed in India?
Mutual fund returns are taxed differently based on the type of fund and the holding period. Equity funds held for more than one year are taxed at 10% on gains above Rs. 1 lakh. Debt funds held for more than three years are taxed at 20% with an indexation benefit.
What is the difference between growth and dividend mutual fund schemes?
In a growth scheme, the mutual fund units are not distributed as dividends, and the returns are reinvested in the scheme. In a dividend scheme, the mutual fund units are distributed as dividends to the investors.
How can one select the right mutual fund for their investment?
To select the right mutual fund, one should consider their investment goals, risk appetite, and investment horizon. They should also look at the fund's historical performance, expense ratio, and fund manager's track record.
