Q1. What is a Mutual Fund?
A Mutual Fund is an investment option where money is collected from many investors and invested in shares, bonds or other securities by a professional fund manager.
Q2. Who manages a Mutual Fund?
A Mutual Fund is managed by a professional fund manager who invests the money according to the scheme’s objective.
Q3. Why should I invest in Mutual Funds?
Mutual Funds help in:
- Professional management
- Diversification of investments
- Convenience and flexibility
- Better returns compared to traditional savings in the long term
Q4. Is Mutual Fund investment safe?
Mutual Funds are subject to market risk, but risk depends on the type of fund. Diversification helps in reducing risk over time.
Q5. What are the different types of Mutual Funds?
Broadly, Mutual Funds are classified into:
- Equity Funds – invest mainly in shares
- Debt Funds – invest in bonds and fixed income securities
- Hybrid Funds – invest in both equity and debt
Q6. What is an Equity Mutual Fund?
Equity Mutual Funds invest mainly in shares of companies and are suitable for long-term wealth creation.
Q7. What is a Debt Mutual Fund?
Debt Mutual Funds invest in fixed income instruments like bonds and government securities and are suitable for stable returns with lower risk.
Q8. What is a Hybrid Mutual Fund?
Hybrid Funds invest in both equity and debt, providing a balance between risk and return.
Q9. What is SIP (Systematic Investment Plan)?
SIP is a method of investing a fixed amount regularly (monthly/quarterly) in a Mutual Fund.
Q10. What are the benefits of SIP?
SIP helps in:
- Discipline in savings
- Lower investment burden
- Averaging the cost of investment
- Reducing market timing risk
Q11. What is lump sum investment in Mutual Funds?
Lump sum investment means investing a one-time large amount in a Mutual Fund scheme.
Q12. What is NAV (Net Asset Value)?
NAV is the price per unit of a Mutual Fund. It changes daily based on market value of investments.
Q13. How are Mutual Fund returns calculated?
Returns depend on:
- NAV appreciation
- Dividends (if any)
Returns are usually measured as annualised returns.
Q14. Can I withdraw money anytime from Mutual Funds?
Yes, most Mutual Funds are open-ended and allow redemption anytime, except schemes with lock-in periods like ELSS.
Q15. What is ELSS Mutual Fund?
ELSS is an Equity Linked Saving Scheme that provides tax benefit under Section 80C with a 3-year lock-in.
Q16. Are Mutual Fund investments taxable?
Yes. Tax depends on:
- Type of fund (equity or debt)
- Holding period (short-term or long-term)
Q17. What are expense ratios in Mutual Funds?
Expense ratio is the annual fee charged by the fund house for managing the fund.
Q18. Can I lose money in Mutual Funds?
Yes, Mutual Funds are market-linked and returns are not guaranteed, especially in the short term.
Q19. Is Mutual Fund better than Fixed Deposit?
Mutual Funds generally offer higher long-term returns, whereas Fixed Deposits offer guaranteed but lower returns.
Q20. How much money is required to start Mutual Fund investment?
You can start SIP with as low as ₹500 per month.
Q21. Is KYC mandatory for Mutual Fund investment?
Yes. KYC (Know Your Customer) is mandatory before investing in Mutual Funds.
Q22. Can NRIs invest in Mutual Funds in India?
Yes. NRIs can invest in Indian Mutual Funds, subject to KYC and FEMA guidelines.
Q23. How long should I stay invested in Mutual Funds?
- Equity funds – 5 years or more
- Debt funds – short to medium term
Longer holding periods reduce risk.
Q24. What is risk profiling in Mutual Funds?
Risk profiling helps determine which type of fund suits you, based on income, goals and risk appetite.
Q25. Should I take professional advice before investing?
Yes. A financial advisor or Chartered Accountant can help select funds based on your financial goals.