A look at the key features of mutual funds

Financial planners recommend mutual funds to many first time investors. Many investors have started investing in mutual funds to meet their long term and short term investment goals. They put in their investments into equity, hybrid or debt schemes for time periods ranging from as little as a day to years together.

Q:How flexible are mutual funds?
A: There are various types of Mutual Funds from which investors can choose to invest starting with a time frame of one day to years. These investments could range from investments in money market instruments, G Secs to equities or even a hybrid combination of instruments. Minimum amounts of investment range from as low as Rs. 500, with no upper limit. You can invest online, offline, directly with the fund house or through an intermediary.

Q:Are mutual funds liquid? How fast can you withdraw in case of an emergency?
A: Many investors look for easy liquidity, so that if a need arises or there is a emergency they can encash easily. In the case of open ended funds, redemption request can be submitted on any. Once such a request is place, you can get your money back in a time frame of 1 to 5 working days. There are some specific schemes in money manager funds, where investors can withdraw upto 2 lakhs, instantaneously throughout the year.

Q:What transparency do mutual funds exhitbit?
A: There is an element of uncertainty when an investors hands over his savings. The comfort is higher if you trust the person and know how exactly your money is going to be used. In the case of Mutual Funds, your money is handed over to a professional fund manager, whose entire job is to keep track of markets and look out for the best opportunities for you, that fits in line with the schemes objective.

In addition, the NAV is published on AMFI and on each of the fund company websites on a daily basis, ensuring that you’re always in the loop about your investments. The fund house also publishes a monthly fact sheet which basically lists out all the important facts you need to know about the scheme you’ve invested in.

Q:How do mutual funds diversify?
A: Mutual funds diversify the portfolio across different types of investments, multiple companies and sectors. equity mutual funds invest in shares of various companies whereas debt funds invest in government securities, NCD, CDs, CPs bonds and other fixed income securities. Thus as an investor, you have a diversified investment basket.