It depends..!

It’s easy to say depends but difficult to give accurate figure at any given point of time and the reason being each fund house or an Asset Management Company (AMC) like SBI Mutal has the freedom to charge a maximum of 7% on the invested amount as exit load (now that the entry load is scrapped)

So each of these AMCs have the freedom to define exit load for each of their schemes and the duration till which they expect the investor to stay with them popularly called as lock-in.

So, always know the exit load and the lock-in period before investing into a mutual fund. It will be a available on AMCs website or some popular websites.

This way, they are safeguarding interst of their other clients who stay invested because every time there is a withdrawl or redemption from a customer, that fund house has to sell shares in effect bringing down the share price. Now the problem is..when you wanted to sell, people ask for a lower price and when you wanted to buy, they demand higher price.

With lot’s of complications on Mutual funds, it may be wise for a short term investor to buy Index funds or even better ETFs where commissions are less and easy to transact.

Please read our articles on ETFs to know more about this area. (You can simply search ETF in our site.)

What is Mutual Fund?

Mutual Fund is a SEBI registered entity that collects money from individuals or corporate investors and invests the collected fund in a variety of financial instruments such as equity, bonds, debentures etc.

Mutual funds issue units to the investors and the appreciation of the mutual fund’s portfolio leads to an appreciation in the value of the units held by investors. There are many mutual funds for each AMCs and each of this Mutual Fund has definite investment objectives as mentioned in its prospectus so investors with common investment principles choose to invest in a fund. This mutual fund is managed by a Fund Manager who is considered to be expert in this area. These fund managers also charge huge fees for managing the money. Typically mutual fund charges entry load of up to 2.25% and this sum goes to broker. However, you can avoid paying entry load by directly investing with AMCs. Some AMCs even allow online investing.

We have many varieties of mutual funds. Variety may vary in terms of open ended or close ended funds, equity or debt funds, tax saving or non-tax saving funds, diversified or sector funds etc.

Investors choose Mutual Funds either because they don’t have the time or the expertise to manage their money. No fund manager will tell you when is the right time to exit the fund so you will have to decide based on performance and market information.

We will soon come with best mutual funds to invest in various popular categories. Stay tuned…!