What is a Mutual Fund?
A Mutual Fund is a common pool of funds managed by a professional Fund Manager. It’s a Trust that collects money from people who have a common investment objective and invests them accordingly. The income earned from these investments is then distributed to the investors proportionately, post deduction of the expenses incurred and taxes paid.
Mutual Funds is a good option for investors who lack the time or knowledge to make traditional and usually complex investment decisions. This way, they can manage their savings passively with a reasonable fee.
Mutual Funds have become an incredibly popular option for a wide variety of investors. This is primarily due to the automatic diversification which they offer as well as professional management of the fund. Investing in Mutual Funds could be a wise thing for people who do not understand the Stock & Bond Markets. Mutual Funds have different schemes available for varied requirements/goals of investors.
Why should you invest in Mutual Funds?
- Benefit from the power of compounding
- Option to invest in lump sum or systematically(SIP)
- Diversified portfolio to minimise risks
- Instill a sense of financial discipline
- Seamless digital on-boarding and investment experience.
Benefits of Mutual Funds for NRI :
- Professional fund management - When one invests in Mutual Funds he/she may quit worrying about where and how to invest. Let the expert fund managers take a call based on thorough market research, monitoring and experience.
- Well regulated - In India, all Mutual Funds are regulated by the Securities and Exchange Board of India (SEBI). All Mutual Funds have to follow transparent processes as laid down by SEBI, protecting the interest of investors. Further, SEBI makes it compulsory for all Mutual Funds to disclose their portfolios every month.
- Affordability - A Mutual Fund allows you to start with small investments. For instance, an SIP lets you invest small amounts of money at regular intervals – helping you achieve your financial goals through disciplined and systematic investing.
- Scheme options - Mutual Funds offer multiple scheme options depending upon one’s financial goals, risk appetite and time horizon.
- Portfolio diversification - One of the biggest advantages of Mutual Funds is that of immediate diversification. One may not have enough money to spread their investments in various stocks and sectors. However, by pooling money from thousands of similar investors, a Mutual Fund spreads ones investments and reduces risk.
- Rupee cost averaging - When one invests in Mutual Funds through the SIP investment route, they can benefit from ‘rupee cost averaging’. This means that the investor buys a larger number of units when the markets are low and a less number of units when markets are high. This average outs the total cost while safeguarding the investor from the ups and downs of the market.
Types of Mutual Funds for NRI
Mutual Funds are divided into different categories. These categories represent the kinds of securities they have targeted for their portfolios and the type of returns they seek. There is a fund for nearly every type of investor or investment approach.
Broadly they can be categorised as below:
1. Equity Funds
Equity Funds primarily invest in stocks. Within this group are various sub-categories. Some Equity Funds are named after the size of the companies they invest in: small-cap/mid-cap/large-cap.
2. Debt Funds
Debt Funds invest money in fixed-income securities such as corporate bonds, government securities and treasury bills. Debt funds can offer stability and regular income with a relatively lower risk. These schemes can be split further into categories based on their duration like low-duration funds, liquid funds, overnight funds, credit risk funds, gilt funds, among others.
3. Hybrid Funds
Hybrid Funds invest in both debt and equity instruments so as to balance out debt and equity. The main intention of Hybrid Funds is to balance the ratio of risk to reward and thus, optimise the return on investment. Hybrid Funds are suitable for investors looking to take more risks for ‘debt plus returns’ benefit rather than sticking to lower but steady income schemes.
4. Solution oriented schemes – for retirement and children
Solution oriented schemes are designed for long-term financial planning with objectives like retirement planning or children. Such schemes are also suitable for investors who lack the skills required for taking decisions regarding fund selection, asset allocation and portfolio rebalancing.
5. Other schemes types
Index Funds, Exchange Traded Funds and Fund of Funds.
1. Mutual Fund investments are subject to market risks. Read all scheme related documents carefully.
2. The information, contained herein, is only for the purpose of information and not for distribution. It does not constitute an offer to buy or sell or solicitation of any offer to buy or sell any securities or financial instruments in the United States of America (“US”) and/or Canada or for the benefit of US persons (being persons falling within the definition of the term “US Person” under the US Securities Act, 1933, as amended) or persons residing in Canada.
3. Terms and Conditions of ICICI Bank, as available at www.icicibank.com , and Terms and Conditions of third parties apply. ICICI Bank is not responsible for third-party products, goods, services and offers. Customers shall be deemed to have read, understood and consented to these terms and conditions.
4. Nothing in this document is intended to constitute advice of any kind including legal, tax, securities or investment advice, opinion regarding appropriateness of any investment, an offer, invitation or solicitation for any product or service and does not intend to create any rights or obligations.
5. The use of any information set out in this document is entirely at the recipient’s own risk. ICICI Bank does not accept any responsibility for any errors, whether caused by negligence or otherwise, or for any loss or damage incurred by anyone by placing reliance on anything set out in this document. This includes any loss or shortfall resulting from the operations of the Mutual Funds. The information set out herein may be subject to updation, completion, revision, verification and amendment.
6. ICICI Bank is acting merely as a Distributor/Corporate agent/Point of service for third parties. Any investment in such third-party products/services shall constitute to be a contract between the investor and the third party. ICICI Bank shall not be liable or responsible for any loss resulting from third party’s products. The contract with regards to the Mutual Fund is between the asset management company and the investor and not between ICICI Bank and the investor. Participation by ICICI Bank’s Customers is on a purely voluntary basis and there is no direct or indirect linkage between the provision of the banking services offered by the Bank to its customers and their usage of the product or participation in the scheme. Please <visit https://www.icicibank.com/personal-banking/investments/mutual-funds/disclosure> for more details.
ICICI Bank Limited is an “AMFI - Registered Mutual Fund Distributor”.