Mutual Funds Investments

It is common for investors to explore various investment avenues to increase their wealth, and mutual funds are the favourite of Indian middle-class investors. Mutual funds are unique investment products, which let investors exploit higher returns on their investments without completely exposing them to the risk factors. Moreover, these allow one to invest small amounts regularly and tide over market volatility.

If you are a novice investor, want to know if mutual fund investment is a good option, you have come to the right place. Here you will find the answers to all your questions regarding mutual fund investment.

What Is Mutual Funds Investment?

Before you invest in mutual funds, let’s look at its definition and what it means to invest in mutual funds.

Per the website of the Association Of Mutual Funds In India, mutual funds are a trust that collects investment from multiple investors sharing a common investment goal and put the funds in a common investment option, managed by a professional fund manager.

Income generated from the investment is then distributed proportionately between the investors of the fund.

Let’s understand with a simple example.

Suppose there is a box of 12 chocolates costing Rs 50. Five friends decided to buy the chocolate, but each only has Rs 10. So they collected Rs 10 from each to invest Rs 50 to buy the box of chocolate.   Mutual funds work in the same way. It creates a pool of funds and then invests the corpus in the market.

To determine the contribution of each investor, the fund manager calculates the NAV value. Just like equity has a trading price, MFs have NAV value. NAV stands for Net Asset Value represents the per-unit market value of all the Units in an MF scheme on a given day.

The formula it uses is the total asset minus total liabilities divided by total outstanding units.

Why Mutual Funds?  

Mutual funds are designed to help investors who want to invest small amounts, don’t have the time to research the stock market, yet want their wealth to grow. Mutual funds resolve the problem by creating a pool of funds from multiple investors and investing a lump sum into different investment vehicles.

Mutual funds offer a vast choice of products to select according to one’s risk appetite, financial goals, and duration.  It allows investors the benefits of growing their wealth at a compounding rate by investing regularly in the market.

Let’s take a look at the different types of mutual funds schemes available in the market.

Mutual funds are innovative products, customisable to meet investors’ goals. Here is a broad classification of popular types of MF schemes.

  • Equity funds: These MF schemes invest majorly on company stocks/shares, involve higher risk and return. The return on these funds depends on market performance.
  • Debt funds: For investors with a low-risk tolerance, debt funds MFs invest in several bonds, debentures, government securities, and other financial instruments that generate assured earning.
  • Money market funds: These funds invest in T-bills, CPs and other liquid investments. Investors considering to park their surplus funds for immediate but moderate returns invest in these schemes.
  • Index funds: These funds invest in securities in a market index to generate similar returns.
  • Income funds: Income fund MFs invest in income-generating instruments like debentures and bonds to create a source of fixed income for the investor.
  • Speciality funds: These represent a cluster of mutual funds that invest in specific sectors and various other market segments to generate a high return.
  • Balanced or hybrid funds: As the name suggests, hybrid funds invest into a mix of asset classes for a balanced risk-return.
  • Fund of funds: These types of mutual funds actively invest in other mutual funds. The return depends on the performance of these funds. These are also called multi-manager funds.
  • Tax-saving funds (ELSS): These MF schemes invest in equities and stocks that qualify to receive tax benefits.
  • Pension funds: Pension funds invest in creating a regular stream of income for the investor after retirement. It generates a balanced return by investing in shares and fixed income-generating funds.
  • Fixed maturity funds: Fixed maturity funds invest in debt and money market instruments of fixed tenure. The maturity of these schemes is either same as that of the fund or before.

Similarly, based on asset classes, maturity types, and investment objectives, several other mutual fund schemes are also available in the market.

Frequently Asked Questions

How To Open A Demat Account

  • Regular Demat account- Traders who reside in India use this type of account.
  • Repatriable Demat account – This account is useful to the Non-Resident Indians as it allows fund transfers abroad. It requires an associated NRE bank account.
  • Non- Repatriable Demat account – This account, too, is for the Non-Resident Indians. However, in this case, funds cannot be transferred abroad, and this account requires an associated NRO bank account.

Yes, the Demat account opening is free of cost. However, there a few additional charges.

  • An Annual Maintenance Charge or AMC. Pay Rs 0 during the first year and after that, only Rs 20 per month + taxes.    
  • A one-time charge of Rs. 50/- for POA + taxes 
  • Rs. 36/- for KRA along with applicable service taxes. 

Account opening with Angel One is a 100% paperless process. Following are the documents that are required for opening an account.

Proof of Identity Documents

  • Pancard
  • Passport
  • Voter ID
  • Driving License


Proof of Address Documents

  • Passport
  • Voter ID
  • Registered Lease or Sale Agreement
  • Driving License
  • Utility Bills
  • Bank Passbook

Following are the types of account that you can open with angel broking

  • Demat Account – An account where you can hold securities in an electronic form, from which credit and debit of securities take place.
  • Trading Account – An account which you can use for buying and selling the securities held in electronic format in the stock market.
  • Demat + Trading Account – An account where you can hold securities in an electronic format and can be bought or sold in the stock market.

Any individual who is a resident of India with the required proof of identification, proof of address, proof of income can open a demat account to purchase and sell securities and other instruments through the stock exchanges in India.

  • Less paperwork since securities held in electronic form & no hassle for the customer.
  • Secure and convenient way to keep track of shares
  • Quick transfer of shares
  • Easy holding no storage risk – Unlike paper certificates dematerialized stocks and shares can’t be stolen or damage or forged.

Yes, an NRI can open a demat account; however, rules of FEMA – Foreign Exchange Management Act will be applicable.

As per Reserve Bank of India (RBI), an NRI can only own up to 5 % of the paid – up capital in an Indian registered company. An NRI can invest in IPOs – Initial Public Offers, however, it is based on a repatriable basis using the NRE demat funds through their NRE (Non-Resident External) Rupee bank account. Nevertheless, if the NRI invests on a non-repatriable basis, then their NRO (Non-Resident Ordinary) Rupee account and NRO demat account will be operated.

Through the PINS – Portfolio Investment Scheme an NRI is permitted to transact in shares and mutual funds through their account in India.

Yes, nomination facility is available in demat account.

It is advisable for all individual beneficial owners to avail of this facility. Resident Individuals, NRIs presently having or opening new accounts either singly or jointly can appoint a nominee. If the account is held jointly all the joint account holders are required to sign the nomination form. The nomination can be changed or updated as and when required. However, Non-individuals including society, Karta of Hindu Undivided Family, Trust, corporate body or holder of power of attorney cannot nominate.

Yes, multiple demat accounts can be opened by an investor. An investor can open more than one account in the same name with the same DP as well as with various other DPs. However, for all accounts, the investor is required to strictly comply with the KYC regulations and provide Proof of Identity, Proof of Address and other documentation proofs as stipulated by SEBI. The PAN card of the investor is mandatory and is required to be furnished at the time of setting up the account.

Yes, a demat account can be opened jointly. However, a demat account can have a maximum of three account holders that is one main holder and two joint account holders

Yes, a demat account can be transferred from one DP to another DP. The investor is required to submit the transfer or closure request to his DP in the prescribed form. The said DP would transfer all the securities and investments presently in the account as per the investor’s instructions to the new DP account.

An investor is given the option to apply for and obtain the shares of an IPO in physical form. However, it is suitable to apply for an IPO through the demat form since the shares issued  through an IPO are tradeable only in form

No, a demat account is mainly for the transaction of shares on the stock exchange. Mutual fund investments of any kind including SIP can be carried out directly by the investor or through a bank or financial institution.

Demat account stands for the dematerialised account used for holding any form of financial securities in electronic format. Investors use a Demat account to hold equity shares, bonds, debentures, mutual funds, ETFs, government securities, and more. It facilitates managing and monitoring all financial securities in one place and quickens the buying and selling process.

Mutual fund investors have the option to transfer MF units to a Demat account. It simplifies the process of managing all financial securities in one place.

Investors can apply to convert mutual fund units into Demat format by availing a conversion request form from the broker or depository (CDSL or NSDL)

Demat account, as such, doesn’t hold money. If you have linked your bank account with the Demat, then the sales proceeds of an asset from the Demat account will be credited directly to your bank account.

To receive delivery of IPO shares a Demat account is a prerequisite.

Investors can open a Demat account by submitting PAN, Aadhaar, Address and Identity proof, along with bank account details.

Since the whole process has become digital, one can open and activate a Demat account within 24 hours. Don’t miss an opportunity to apply for the best IPO offers. Get an Angel One Demat account today!