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QWhat is a Mutual Fund?A
A Mutual fund is a mechanism for pooling resources by issuing units to the investors and investing funds in securities, in accordance with objectives as disclosed in the offer document. Mutual fund units are issued to the investors in accordance with a quantum of money invested by them. Investors of mutual funds are known as unit holders.
Investments in securities are spread across a wide spectrum of industries and sectors and thereby reduce the risk involved through diversification. The profits or losses are shared by the investors in proportion to their investments. The mutual funds normally come out with a number of schemes with different investment objectives which are launched from time to time. A mutual fund is required to be registered with Securities and Exchange Board of India (SEBI) which regulates securities markets before it can collect funds from the public.
QWhat is an Asset Management Company?A
Asset Management Company (AMC) is a company that invests its clients' pooled fund into securities that match its declared financial objectives. Asset management companies provide investors with more diversification and investing options than they would have by themselves.
QWhat is Net Asset Value (NAV)?A
The Net Asset Value is the cumulative market value of the securities held by the scheme. Since market value of securities changes every day, NAV of a scheme also varies on day to day basis. The NAV per unit is the market value of securities of a scheme divided by the total number of units of the scheme on any particular date. For example, if the market value of securities of a mutual fund scheme is Rs 200 lakhs and the mutual fund has issued 10 lakhs units of Rs. 10 each to the investors, then the NAV per unit of the fund is Rs.20. NAV is required to be disclosed by the mutual funds on a regular basis - daily or weekly - depending on the type of scheme."
QWhat are the benefits of investing in Mutual Funds?A
- Qualified and experienced professionals manage Mutual Funds. Generally, investors, by themselves, may have reasonable capability, but to assess a financial instrument, a professional analytical approach is required in addition to access to research and information, time and methodology to make sound investment decisions.
- Since Mutual Funds make investments in a number of stocks, the resultant diversification reduces risk. They provide the small investors with an opportunity to invest in a larger basket of securities.
- The investor is spared the time and effort of tracking investments, collecting income, etc. from various issuers, etc.
- It is possible to invest in small amounts as and when the investor has surplus funds to invest.
- Mutual Funds are well regulated & governed by SEBI (Mutual Funds) Regulations, 1996 thereby ensuring transparency of investments.
- In case of open-ended funds, the investment is very liquid as it can be redeemed at any time with the fund, unlike direct investment in stocks/bonds.
QAre there any risks involved in investing in Mutual Funds?A
Mutual Funds unlike fixed deposit, Bonds and other Government securities do not provide guarantee of returns. Their returns are directly related to the performance of the underlying asset in which they invest like shares, debentures etc which are known for the risk associated with them. The unit value may vary with the performance of the company, and companies may default in payment of interest/principal on their debentures/bonds/deposits. In addition to these, changes in macro level policies & regulations may also affect sectors in Indian economy thereby affecting mutual fund performance.
QWhat are the different types of mutual fund schemes?A
Schemes according to Maturity Period
Open-ended Fund/ Scheme
An open-ended fund or scheme is one that is available for subscription and repurchase on a continuous basis. These schemes do not have a fixed maturity period. Investors can conveniently buy and sell units at Net Asset Value (NAV) related prices which are declared on a daily basis. The key feature of open-end schemes is liquidity.
Close-ended Fund/ Scheme
A close-ended fund or scheme has a stipulated maturity period e.g. 5-7 years. The fund is open for subscription only during a specified period at the time of launch of the scheme. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where the units are listed. In order to provide an exit route to the investors, some close-ended funds give an option of selling back the units to the mutual fund through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor i.e. either repurchase facility or through listing on stock exchanges. These mutual funds schemes disclose NAV generally on weekly basis.
Interval Funds / Scheme
These funds combine the features of both open-ended and close-ended funds wherein the fund is close-ended for the first couple of years and open-ended thereafter. Some funds allow fresh subscriptions and redemption at fixed times every year (say every six months) in order to reduce the administrative aspects of daily entry or exit, yet providing reasonable liquidity
Schemes according to Investment Objective
Growth / Equity Funds
The aim of growth funds is to provide capital appreciation over medium to long- term periods. Such schemes normally invest a major part of their corpus in equities. Such funds have comparatively high risks. These schemes provide different options to the investors like dividend option, capital appreciation, etc. and the investors may choose an option depending on their preferences. The investors must indicate the option in the application form. The mutual funds also allow the investors to change the options at a later date. Growth schemes are good for investors having a long-term outlook seeking appreciation over a period of time.
Income / Debt Funds
The aim of income funds is to provide regular and steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures, Government securities and money market instruments. Such funds are less risky compared to equity schemes. These funds are not affected because of fluctuations in equity markets. However, opportunities of capital appreciation are also limited in such funds. The NAVs of such funds are affected because of change in interest rates in the country. If the interest rates fall, NAVs of such funds are likely to increase in the short run and vice versa. However, long term investors may not bother about these fluctuations.
The aim of balanced funds is to provide both growth and regular income. As such, schemes invest both in equities and fixed income securities in the proportion indicated in their offer documents. These are appropriate for investors looking for moderate growth. They generally invest 40-60% in equity and debt instruments. These funds are also affected because of fluctuations in share prices in the stock markets. However, NAVs of such funds are likely to be less volatile compared to pure equity funds.
Money Market or Liquid Fund
These funds are also income funds and their aim is to provide easy liquidity, preservation of capital and moderate income. These schemes invest exclusively in safer short-term instruments such as treasury bills, certificates of deposit, commercial paper and inter-bank call money, government securities, etc. Returns on these schemes fluctuate much less as compared to other funds. These funds are appropriate for corporate and individual investors as a means to park their surplus funds for short periods.
These funds invest exclusively in government securities. Government securities have no default risk. NAVs of these schemes also fluctuate due to change in interest rates and other economic factors as in the case with income or debt oriented schemes.
Index Funds replicate the portfolio of a particular index such as the BSE Sensitive index, S&P NSE 50 index (Nifty), etc. These schemes invest in the securities in the same weightage comprising of an index. NAVs of such schemes would rise or fall in accordance with the rise or fall in the index, though not exactly by the same percentage due to some factors known in technical terms as a "tracking error". Necessary disclosures in this regard are made in the offer document of the mutual fund scheme.
QCan a mutual fund impose fresh load or increase the load beyond the level mentioned in the offer documents?A
Mutual funds cannot increase the load beyond the level mentioned in the offer document. Any change in the load will be applicable only to prospective investments and not to the original investments. In case of imposition of fresh loads or increase in existing loads, the mutual funds are required to amend their offer documents so that the new investors are aware of loads at the time of investments.
QList of Mutual funds offered at www.Kotaksecurities.comA
- Birla Sun life Mutual fund
- Deutsche Mutual fund
- DSP Blackrock Mutual fund
- Fidelity Mutual fund
- FORTIS Mutual fund
- Franklin Templeton Mutual fund
- HDFC Mutual fund
- HSBC Mutual fund
- ICICI Prudential Mutual fund
- IDBI Principle Mutual fund
- IDFC Mutual fund
- ING Vysya Mutual fund
- JM Mutual fund
- Kotak Mahindra Mutual fund
- L&T Mutual fund
- LIC Mutual fund
- Reliance Mutual fund
- SBI Mutual fund
- Sundaram BNP Paribas Mutual fund
- Tata Mutual fund
QList of Mutual funds transaction types offered at www.kotaksecurities.comA
Mutual funds transaction types are bifurcated in two categories i.e. Commercial transaction and non-commercial transactions.
Commercial transactions offered at kotaksecurities.com are following:
- Purchase / Additional Purchase
- Systematic Investment Plan
- Systematic Transfer Plan
Non-Commercial transactions offered at kotaksecurities.com are following: Such transactions comprises of the requests for change in client's profile in AMC records for instance:
- Offline to Online portfolio conversion
- Nomination Request
- Bank updation
QDo I need to have a Demat account to transact in Mutual funds?A
Some schemes like ETFs are compulsorily allotted in demat mode. Hence to transact in such a scheme you need to have a Demat Account linked to your trading account.
For allotment in physical mode there is no need for a Demat account.
As per recent developments in the industry, units of all mutual funds schemes can be allotted in both the modes i.e. Physical as well as in Demat. Also, the depositories have allowed the DPs to facilitate holding of mutual funds in demat account. Currently Kotak Securities facilitates the transaction of physical mode of allotment only.
QWhat are ETFs - Exchange Traded Funds?A
- These are Mutual funds schemes which are listed on exchanges i.e. NSE or BSE and are traded on the same.
- Allotment under these schemes is compulsorily in Demat mode. Some of examples are : Liquid Bees, Gold Bees, Kotak Gold ETF, Reilance Gold ETF, Birla gold ETF, DSP gold ETF etc.
- Prices of these schemes are derived through volumes of trade & demand, similar to any other stock
QWhat are the benefits of investing in mutual funds online?A
- Ease of tracking status & periodical variations in mutual funds
- Efficient & Speedy
- Avoid issuing of cheques & paper work every time you invest
- Ensures privacy of your investments
- Invest at your convenience through call & trade
QWhat are the features available when investing online in mutual funds through Kotak Securities?A
- Buy- Choose from over 1000 schemes representing more than 21 AMCs for the purchase of mutual funds units.
- Track- You can view your transaction status in addition to portfolio monitoring & monthly MIS on your mutual funds portfolio.
- Redeem- You can redeem your mutual fund units anytime & exit/reinvest as the case may be.
- Transfer- www.kotaksecurities.com enables you to transfer the funds directly from your bank account to MF ledger & also receive mutual funds proceeds directly into your bank account.
- SIP- Enjoy the benefit of investing in SIPs by receiving regular updates on your SIP installments, due dates & value-added features every now & then.
QAre the online investments in mutual funds subject to any charges or fees?A
Kotak Securities as a distributor does not levy any charges or fees for the investments in any mutual funds schemes online.
QIf I invest online, how can I seek assistance for mutual funds investments?A
The feature of "Portfolio Advice "available on www.kotaksecurities.com under the Mutual Funds section act as a virtual relationship manager to offer assistance sought by our clients.
QWhat are the kinds of assistance offered by "Portfolio Advice"?A
- Advisory on your existing mutual funds portfolio
- Any other query with relation to mutual funds investments online
QHow can I make use of "Portfolio Advice" feature?A
- Login to www.kotaksecurities.com.
- Go to Mutual Funds > Portfolio Advice.
- Your registered email-id will appear by default next to "From" box & the Kotak securities assistance email-id will reflect automatically next to "To" box.
- Type your query in the box provided.
- Click on "Send Mail". Assistance shall be made available to you in within 48 hours.
QCan non-resident Indians (NRIs) invest in mutual funds?A
Yes, non-resident Indians can also invest in mutual funds. Necessary details in this respect are given in the offer documents of the schemes.
QWhat should an investor look into an offer document?A
An abridged offer document, which contains very useful information, is required to be given to the prospective investor by the mutual fund. The application form for subscription to a scheme is an integral part of the offer document. SEBI has prescribed minimum disclosures in the offer document. An investor, before investing in a scheme, should carefully read the offer document. Due care must be given to portions relating to main features of the scheme, risk factors, initial issue expenses and recurring expenses to be charged to the scheme, entry or exit loads, sponsor's track record, educational qualification and work experience of key personnel including fund managers, performance of other schemes launched by the mutual fund in the past, pending litigations and penalties imposed, etc.
QWhen will the investor get certificate or statement of account after investing in a mutual fund?A
Mutual funds are required to dispatch certificates or statements of accounts within six weeks from the date of closure of the initial subscription of the scheme. In case of close-ended schemes, the investors would get either a demat account statement or unit certificates as these are traded in the stock exchanges. In case of open-ended schemes, a statement of account is issued by the mutual fund within 30 days from the date of closure of initial public offer of the scheme. The procedure of repurchase is mentioned in the offer document.
QHow long will it take for transfer of units after purchase from stock markets in case of close-ended schemes?A
According to SEBI Regulations, transfer of units is required to be done within thirty days from the date of lodgment of certificates with the mutual fund.
QAs a unit holder, how much time will it take to receive dividends/repurchase proceeds?A
A mutual fund is required to dispatch to the unit holders the dividend warrants within 30 days of the declaration of the dividend and the redemption or repurchase proceeds within 10 working days from the date of redemption or repurchase request made by the unit holder.
QHow do I know the performance of a mutual fund portfolio at www.kotaksecurities.com?A
You can view Mutual funds portfolio tracker available in the Mutual Funds section of www.kotaksecurities.com. It displays cost of your holding, the current value of holding, realised gain/loss, unrealised gain/loss, IRR (Internal rate of returns), etc.
QIf a mutual fund scheme is wound up, what happens to the money invested?A
In case of winding up of a scheme, the mutual funds pay a sum based on prevailing NAV after adjustment of expenses. Unit holders are entitled to receive a report on winding up from the mutual funds which gives all the necessary details.
QCan an NRI buy Mutual Fund Units in the PINS account?A
Being an NRI, mutual fund units can only be bought in NON-PINS account.
QIs there any tax applicable on the redemption of mutual funds?A
Yes. The tax applicable is called as STT i.e. Security transaction tax which is 0.25%. STT is applicable only in case of redemption of equity linked schemes.
QWhat is a Switch request?A
Switch means an option to the Customer to switch all or part of their investments in a scheme/plan/option of the Fund to another scheme/plan/option of the same Fund which is available for investment at that time, subject to the terms and conditions of the Offer Document of the respective Schemes. The switch will be made by redeeming existing units and re investing the redemption proceeds in another scheme/plan/option at the applicable redemption price and purchase price respectively for the scheme(s)/, plan(s)/, option(s).
QWhat is SIP - Systematic Investment Plan?A
Systematic Investment Plan (SIP) means an option available with the Customer for investing, at a specified frequency, in a specified Scheme of the Fund, a fixed amount of Rupees for purchasing additional units at the applicable NAV on a specified date, assuming that the provisions of the Offer Document of the respective Scheme shall always be applicable for SIP transactions.
QWhat is STP?A
Systematic Transfer Plan (STP) means an option available with the customer who holds Units to transfer a pre determined amount or a variable amount subject to deduction of tax, if any, at a specified frequency, from a specified Scheme of the fund to another specific scheme of the fund at a specified period at a specified frequency at the applicable NAV on a specified date, assuming that the provisions of the Offer document of the respective Schemes shall always be applicable for STP transactions.
QWhat is Auto debit with respect to Systematic transfer of funds?A
Auto-Debit feature enables automatic transfer of funds from your Kotak Mahindra Bank Account to MF Ledger before the due date of SIP & ensures timely investment in mutual fund SIPs with no defaults.
QWhat is a Load Fund?A
A Load Fund is one that charges a percentage of NAV for entry or exit. That is, each time one buys or sells units in the fund, a charge will be payable. This charge is used by the mutual fund for marketing and distribution expenses. Suppose the NAV per unit is Rs.10. If the entry as well as exit load charged is 1%, then the investors who buy would be required to pay Rs.10.10 and those who offer their units for repurchase to the mutual fund will get only Rs.9.90 per unit. The investors should take the loads into consideration while making investment as these affect their yields/returns. However, the investors should also consider the performance track record and service standards of the mutual fund which are more important. Efficient funds may give higher returns in spite of loads.
A no-load fund is one that does not charge for entry or exit. It means the investors can enter the fund/scheme at NAV and no additional charges are payable on purchase or sale of units.
QDo I have to pay any entry load for mutual fund purchases made after August 01, 2009?A
No. Prior to the implementation of the SEBI guideline, an entry load was charged on all Mutual fund purchases. As per the new guidelines issued by SEBI, with effect from August 1, 2009, entry load will not be charged on purchases in existing mutual fund schemes or on schemes launched thereafter. However, any investment made by you in an NFO which was launched prior to August 1, 2009 will continue to attract entry load and other charges as specified in the offer document.
QWhat exit load will I have to pay as on a particular date?A
Exit load is not a standard charge; it varies from scheme to scheme depending upon the type & objective of the scheme. Exit load is calculated as a percentage of NAV & normally varies between 0.25% to 2% of the redemption value. The funds which do not charge exit loads are known as 'No Load Funds'
QWhat is redemption price?A
Redemption price is the price received on selling units of open-ended scheme. If the fund does not levy an exit load, the redemption price will be same as the NAV. The redemption price will be lower than the NAV in case the fund levies an exit load.
QWhat is Repurchase price?A
Repurchase price is the price at which a close-ended scheme repurchases its units. If the fund does not levy an exit load, the repurchase price will be same as the NAV. The repurchase price will be lower than the NAV in case the fund levies an exit load.
QHow can I convert my online holdings with other distributors to Kotak Securities online?A
It can be done by placing an online request through www.kotaksecurities.com > Mutual Funds > Offline to Online.
QCan I place a direct request to AMC for the investments done through www.kotaksecurities.com?A
QCan I place nomination requests for online mutual funds portfolio subscribed through www.kotaksecurities.com?A
Yes. There is an online facility to place nomination request.
QWhat is KRA?A
SEBI has introduced the concept of KYC Registration Agency [KRA]. This will enable an investor to invest / trade through various intermediaries, after undergoing the KYC process only once through any intermediary. Additionally, any subsequent changes in investor static / demographic information of an investor across various SEBI registered intermediaries can be made by giving a single request to the KRA through one of the registered intermediaries.
QWhat is IPV?A
IPV stands for In Person Verification wherein verification of investor is carried out in-person by the intermediary at the time of accepting the documents from the investor for KRA registration.
QHow and where can you check the status of your KRA?A
PAN is required to be entered on the CVL KRA website (under KYC Inquiry) to check the status of the KRA. Then based on the status received from the cvlkra site, clients have to action out as mentioned in the chart below.
Status of PAN Action to be taken by Client Can Invest in Verified by CVL KRA NIL All Mutual Funds MF - Verified by CVLMF* Complete KRA by submitting the modification form along with the documents to an AMC wherein you have investments Existing Folios only Rejected - Present in NDML PAN status to be checked on NDML KRA website All Mutual Funds if status is "KYC Registered" Rejected - Present in DOTEX PAN status to be checked on NSE KRA website All Mutual Funds if status is "Approved" Rejected - Present in CAMS KRA PAN status to be checked on CAMS KRA website All Mutual Funds if status is "Verified" Not Available Submit documents to any intermediary for KRA registration Cannot invest in MF
'* For Modification form, pls. visit https://www.cvlkra.com/, click on Downloads ' KYC Forms (Zip file will be downloaded), select KYC Change Individual Forms.PDF
KRA Agency Web Link CVL KRA https://www.cvlkra.com/Default.aspx CAMS KRA https://www.camskra.com/ NDML KRA https://kra.ndml.in/ NSE KRA https://www.nsekra.com/
QWhat is the meaning of the various status of the PAN on the KRA websites and whether investment can be done in MF?A
KYC Status Description Can/ cannot invest in MF KYC Registered/ Verified/ Approved with KRA KRA registration has been successfully completed. Can invest in all MFs KYC Registered with CVLMF Please complete your KRA by submitting the modification form for KRA registration Can invest in MF in existing folios only Submitted with KRA Intermediary has processed the KRA documents submitted by you Cannot invest in MFs Under Process with KRA KRA is under process with the KRA agency Cannot invest in MFs On Hold with KRA KRA process is on hold by the KRA agency due to incomplete documents / IPV pending / Docs not received by agency etc Cannot invest in MFs Rejected by KRA** Please contact the intermediary to whom the documents have been submitted to confirm the reason for rejection Cannot invest in MFs Deactivated PAN is de-active Cannot invest in MFs Old KYC Record Please complete your KRA by submitting the modification form for KRA registration Cannot invest in MFs Not Available Submit your documents to an intermediary for KRA registration Cannot invest in MFs
** - In case the status of your PAN is "Rejected by KRA", it is possible that the KYC has been done through some other KRA agency. In such cases, please also check the status of the PAN on all other KRA sites for an updated status.
QHow to update your KRA with Kotak Securities Ltd to invest in Mutual Funds?A
Once your KRA has been completed through any AMC and the status of your KRA is "KYC Registered/ Verified/ Approved with KRA" on any of the KRA websites, please contact Kotak Securities Customer Service team for updation of your KRA in our system basis which we will activate your account for investments in mutual funds.
Why Demat Account?
- Mandatory by SEBI
- Easy Portfolio Management
- Security of Equity Investments.
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