Mutual Funds

About Mutual Fund Industry


A mutual fund is a type of financial vehicle made up of a pool of money collected from many investors to invest in securities like stocks, bonds, money market instruments, and other assets. Mutual funds are operated by professional money managers, who allocate the fund's assets and attempt to produce capital gains or income for the fund's investors. A mutual fund's portfolio is structured and maintained to match the investment objectives stated in its prospectus.

Mutual funds give small or individual investors access to professionally managed portfolios of equities, bonds, and other securities. Each shareholder, therefore, participates proportionally in the gains or losses of the fund. Mutual funds invest in a vast number of securities, and performance is usually tracked as the change in the total market cap of the fund—derived by the aggregating performance of the underlying investments.

KEY TAKEAWAYS

  • A mutual fund is a type of investment vehicle consisting of a portfolio of stocks, bonds, or other securities.
  • Mutual funds give small or individual investors access to diversified, professionally managed portfolios at a low price.
  • Mutual funds are divided into several kinds of categories, representing the kinds of securities they invest in, their investment objectives, and the type of returns they seek.
  • The overwhelming majority of money in employer-sponsored retirement plans goes into mutual funds.

SIP

What is an SIP?

A Systematic Investment Plan (SIP) is a facility with which you can invest in mutual funds through small and periodic instalments. You can initiate your investment on any day of the month by investing a fixed amount in a scheme of your choice.

Over a period of time, you can accumulate enough wealth to turn your dreams into actionable decisions.

Key features of Investing via Multiple SIPs

Goal Planning

Investing via Multiple SIPs can be a great way to achieve individual goals. It ensures that an investment is made for one particular goal and not used for another. This way you can keep track of your specific goals and achieve them easily.

Asset allocation

Long term goals can fulfil by investing in equity-oriented mutual funds. However, short- term and mid-term goals have a shorter timeline and can be achieved by investing via multiple SIPs aims to help you build portfolio consisting of a mix of various assets.

Diversification

Mutual funds invest in different companies within each asset class. They work as a great asset diversification product, thereby having potential of lower risk. Further, multiple SIPs can provide diversification for both asset class and time.

Risk Mitigation

Asset performance depends on various factors like market conditions and the performance of each asset class. Investing via multiple SIPs can help reduce the impact of market volatility on your overall portfolio and help mitigate risk in your portfolio.

Why you should invest via SIP?

  • Flexibility: You can adjust the investment amount as per your convenience.
  • Convenience: you can also choose the frequency of your investments (weekly, monthly, quarterly instalments) as per your convenience.
  • Pocket Friendly: you can start an SIP for as low as ₹500.
  • Power of Compounding: An SIP not only inculcates financial discipline but also helps you earn better returns as the interest on the invested amount gets compounded each time.
  • Limited uncertainty by Investing Over time: An SIP limits risks by spreading the investments over months, giving an even spread of investments across market movements.
  • Simplified Goal Planning: A disciplined approach towards your SIP can help you map out your goals for the present as well as the future.
  • Balances Market Volatility: An SIP helps you avoid timing the market. This means that when the cost is low, you get to buy more number of units thus averaging the cost per unit.
  • Stability in Investment: When the market is down, you get more units. And when the market is up, you get more value of all the units allocated to you.

Golden Rules for Investing in SIPs:

  • Start Early: An early investment in SIP allows you to invest smaller amounts over a longer period. This way, your goals seem well within reach.
  • Link one investment to one goal: Focus is the key to achieve all your goals. Have a goal-specific investment approach and invest regularly towards them. This helps you analyse your investments regularly and helps keep track of your goals.
  • Stay committed for the long term: A long-term investment in SIPs can help you realize your goals through the power of compounding.
  • Diversify SIPs: Consider your risk appetite and then diversify your SIPs keeping your goals in mind.
  • Avoid withdrawals based on market movements: SIPs are an investment tool that helps you create wealth in the long term. It is important to keep calm during weaker market times and avoid redemption.
  • Invest via Multiple SIPs: One SIP cannot be enough to take care of all your desires. Invest via multiple SIPs and let all your goals come true.

An SIP for every need:

You can invest in an SIP from these available variants:

  • Step up SIP: This facility allows you to gradually increase the amount you want to invest based on investment appetite or increase in earnings.
  • Any day SIP: You are given the flexibility to choose an investment date (from the 1st till the 28th of the month) as per your convenience.
  • Micro SIP: Here, the minimum application amount in select schemes is as low as ₹100. This allows you to spend time in the market and gradually step-up the SIP amount.
  • SIP Pause: This facility will give you the option to pause your SIP for a specified number of instalments and your SIP would restart from the immediate month after completion of the pause period.
  • Perpetual SIP: : Typically, an SIP comes with a pre-determined tenure. Here, you have the choice to not enter the end date in the SIP mandate. Thus, allowing you to redeem the fund after achieving the desired financial goal.
  • Fast Forward SIP: This facility allows you increase the SIP frequency from monthly to weekly or quarterly to monthly and fast forward your investment journey to reach your goals faster.

Lump sum Investment (One Time Investment)

What are Lumpsum Investments in Mutual Funds?

Once you’ve selected a mutual fund scheme based on your risk appetite, investment horizon, and financial objectives, there are typically two ways to invest in the scheme- Lumpsum and SIP. With lumpsum investment in a mutual fund, you invest your funds earmarked for investments in any mutual fund scheme of your choice. For instance, if you have Rs. 1 lakh to invest, you invest the entire lumpsum amount in a mutual fund in one go. Systematic or SIP is the opposite of lumpsum investments. With SIP, you make smaller regular investments in mutual funds. For instance, you can invest Rs. 5,000 in any scheme every month.

Features of a lump Sum investment

Investing in mutual funds through the lumpsum route has some distinct features that you can consider before investing:

  • Minimum investment: Since lump sum means a single investment, the minimum amount that most mutual funds require is Rs.5, 000. However, after the initial lump sum investment, usually you can make subsequent investments in multiples of Rs.1,000 in the same scheme.

  • Time horizon: You can hold a lump sum equity mutual fund investment for longer time duration. Financial experts suggest a minimum of three years. If your goal is for short-term appreciation, you could consider putting it in a debt fund or liquid fund.

  • Market volatility: If you invest a large amount of money in one place, your investment could take a hit when markets dip. However, the key is to hold on to the investment over a longer period.

Market fluctuations boosting your investment are just as likely as eroding it. The benefits of lumpsum investment are particularly pronounced during periods of a market low. This is because you can buy more mutual fund units at lower prices and choose to sell when markets improve, thereby pocketing a substantial profit.

SWP- Systematic Withdrawal Plan

If investors want regular cash flow from their investments the automatic choice for many are bank Bonds & Securitiess or postal deposits. However, declining interest rates on these schemes have made investors worry about their future income needs. Mutual funds have a solution for this, called SWP. What is SWP in mutual fund? SWP or systematic withdrawal plan is a mutual fund investment plan, through which investors can withdraw fixed amounts at regular intervals, for example – monthly/ quarterly/ yearly from the investment they have made in any mutual fund scheme.

The investors can choose a day of the month/quarter/year when withdrawal can be made and the amount credited to investors bank account by the AMC. To generate this cash flow, SWP Plan redeems units of mutual fund scheme at the chosen interval. Investors can continue with SWP as long as there are balance units in the scheme.

SWP Regular Cashflow while Preserving Capital

SWP (Systematic Withdrawal Plan): One-time Lump sum investment, Regular fixed payout (income), suitable for people looking for regular income/retirees.

Calculation of Systematic Withdrawal Plan (SWP)

Investment Amount 25,00,000.00
Monthly withdrawal 25,000.00
Current Valuation 33,60,893.51
Total Withdrawal 20,25,000.00
Annualised Return 13.32
Asset Under Management 39,236.78
Investment Period 7.8Years
Current Nav 01.08.2023 60.56
Nav Date Nav Cash Flow Units Redeemed Balance Units Current Valuation
01-Dec-15 22.99 1,08,742.93 25,00,000.00
01-Dec-16 25.26 25,000.00 989.86 1,07,753.07 27,46,411.48
02-Jan-17 25.11 25,000.00 995.70 1,06,753.37 27,05,464.03
01-Feb-17 27.23 25,000.00 918.00 1,05,839.37 29,07,323.44
01-Mar-17 27.85 25,000.00 897.67 1,04,941.70 29,47,626.33
03-Apr-17 28.95 25,000.00 863.71 1,04,077.99 30,37,537.49
02-May-17 30.14 25,000.00 829.55 1,03,248.45 31,36,598.46
01-Jun-17 30.62 25,000.00 829.55 1,03,248.45 31,36,598.46
03-Jul-17 30.56 25,000.00 818.17 1,01,613.74 31,29,909.36
01-Aug-17 31.95 25,000.00 782.52 1,00,831.22 32,46,355.69
01-Sep-17 32.01 25,000.00 780.98 1,00,050.23 32,27,708.05
03-Oct-17 31.57 25,000.00 792.02 99,258.22 31,58,085.65
01-Nov-17 33.15 25,000.00 754.22 98,504.00 32,90,112.15
01-Dec-17 32.45 25,000.00 770.51 97,733.49 31,96,060.84
01-Jan-18 33.40 25,000.00 748.48 96,985.01 32,64,396.33
01-Feb-18 34.17 25,000.00 731.72 96,253.29 33,13,589.86
01-Mar-18 32.56 25,000.00 767.84 95,485.45 31,33,910.83
02-Apr-18 32.11 25,000.00 778.57 94,706.88 30,66,037.86
02-May-18 33.09 25,000.00 755.49 93,951.39 31,33,945.30
01-Jun-18 32.83 25,000.00 761.55 93,189.84 30,84,236.09
02-Jul-18 32.63 25,000.00 766.19 92,423.65 30,40,691.31
01-Aug-18 34.79 25,000.00 718.64 91,705.01 32,15,233.97
03-Sep-18 35.37 25,000.00 706.83 90,998.18 32,43,514.59
01-Oct-18 32.83 25,000.00 761.55 90,236.63 29,87,288.21
01-Nov-18 31.76 25,000.00 787.08 89,449.55 28,66,186.20
03-Dec-18 33.05 25,000.00 756.48 88,693.08 29,56,128.88
01-Jan-19 33.41 25,000.00 748.19 87,944.89 29,63,590.54
01-Feb-19 32.95 25,000.00 758.84 87,186.05 28,97,344.39
01-Mar-19 32.94 25,000.00 759.02 86,427.02 28,71,646.90
01-Apr-19 35.56 25,000.00 703.14 85,723.89 30,72,912.85
02-May-19 35.54 25,000.00 703.37 85,020.52 30,46,884.17
03-Jun-19 37.20 25,000.00 672.06 84,348.45 31,62,678.14
01-Jul-19 36.43 25,000.00 686.25 83,662.21 30,72,814.18
01-Aug-19 33.72 25,000.00 741.44 82,920.76 28,20,922.27
03-Sep-19 33.26 25,000.00 751.56 82,169.20 27,58,276.25
01-Oct-19 35.21 25,000.00 710.07 81,459.13 28,93,013.17
01-Nov-19 36.65 25,000.00 682.05 80,777.08 29,85,803.08
02-Dec-19 37.28 25,000.00 670.60 80,106.48 30,11,369.53
01-Jan-20 37.39 25,000.00 668.61 79,437.87 29,95,261.35
03-Feb-20 37.17 25,000.00 672.59 78,765.28 29,52,705.58
02-Mar-20 35.31 25,000.00 708.01 78,057.27 27,81,202.15
01-Apr-20 26.08 25,000.00 958.59 77,098.68 20,35,733.56
04-May-20 28.94 25,000.00 863.92 76,234.76 22,31,081.59
01-Jun-20 30.55 25,000.00 818.22 75,416.54 23,29,276.97
01-Jul-20 32.47 25,000.00 769.97 74,646.57 24,48,699.64
03-Aug-20 33.65 25,000.00 742.90 73,903.68 25,12,006.54
01-Sep-20 34.92 25,000.00 715.90 73,187.78 25,80,790.31
01-Oct-20 35.17 25,000.00 710.77 72,477.00 25,74,233.63
02-Nov-20 35.49 25,000.00 704.44 71,772.56 25,72,136.36
01-Dec-20 39.92 25,000.00 626.24 71,146.32 28,65,232.34
01-Jan-21 41.96 25,000.00 595.83 70,550.49 29,85,157.40
01-Feb-21 43.24 25,000.00 578.22 69,972.27 30,50,320.93
01-Mar-21 45.24 25,000.00 552.58 69,419.68 31,65,685.29
01-Apr-21 45.59 25,000.00 548.32 68,871.37 31,65,121.02
03-May-21 44.81 25,000.00 557.86 68,313.50 30,86,401.36
01-Jun-21 47.34 25,000.00 528.07 67,785.43 32,34,097.90
01-Jul-21 48.44 25,000.00 516.08 67,269.35 32,83,661.87
02-Aug-21 50.14 25,000.00 498.63 66,770.72 33,72,683.42
01-Sep-21 51.98 25,000.00 480.93 66,289.79 34,70,942.16
01-Oct-21 52.79 25,000.00 473.60 65,816.19 34,99,239.15
01-Nov-21 53.78 25,000.00 464.88 65,351.31 35,39,397.18
01-Dec-21 51.25 25,000.00 487.77 64,863.54 33,49,515.83
03-Jan-22 53.07 25,000.00 471.09 64,392.45 34,42,178.29
01-Feb-22 53.49 25,000.00 467.41 63,925.03 34,44,094.34
02-Mar-22 49.56 25,000.00 504.44 63,420.59 31,68,124.66
01-Apr-22 52.45 25,000.00 476.67 62,943.92 33,26,219.91
02-May-22 51.15 25,000.00 488.75 62,455.17 32,19,644.59
01-Jun-22 49.48 25,000.00 505.25 61,949.92 30,90,281.99
01-Jul-22 47.04 25,000.00 531.46 61,418.46 29,14,124.19
01-Sep-22 53.63 25,000.00 466.16 60,473.19 32,68,177.11
03-Oct-22 51.42 25,000.00 486.19 59,987.00 31,09,531.36
01-Nov-22 55.26 25,000.00 452.41 59,534.59 33,14,881.43
01-Dec-22 56.40 25,000.00 443.26 59,091.33 33,57,750.86
02-Jan-23 55.31 25,000.00 452.00 58,639.33 32,68,341.31
01-Feb-23 53.57 25,000.00 466.68 58,172.65 31,41,308.88
01-Mar-23 53.17 25,000.00 470.19 57,702.46 30,93,039.82
03-Apr-23 53.02 25,000.00 471.52 57,230.94 30,59,384.45
02-May-23 55.18 25,000.00 453.06 56,777.88 31,58,003.28
01-Jun-23 56.52 25,000.00 442.32 56,335.56 32,09,085.64
03-Jul-23 58.71 25,000.00 425.82 55,909.73 33,07,460.51
01-Aug-23 60.56 25,000.00 412.81 55,496.92 33,85,893.51

STP- Systematic Transfer Plan

  • An STP is a plan that allows investors to give consent to a mutual fund to periodically transfer a certain amount from one scheme to another scheme in the same fund house.
  • The income generated from the Bond Fund (LUMPSUM) will be reinvested in SIP, so that the account balance for the SIP is not required.
  • Transfer can be weekly, fortnightly, monthly and quarterly.
  • STP is a risk mitigation strategy. It will protect you from any adverse loss to a large extent.
  • STP is a way to ‘Systematically’ invest in equity mutual fund, while the rest of money ‘grow’ in a liquid fund.

Calculation of Mutual Fund STP Investment

STP - Transferor Scheme Duration : 09/01/2012 to 29/12/2017
Total Initial Investment Amount Weekly STP Amount (Rs.) STP Period No of Installments Total Amount Transferred Total No. Units Remaining Value as on 25/12/2017 Current Value as on 29/12/2017 Profit XIRR (%)
25,00,000 10,000 09/01/2012 to 29/12/2017 312 -31,20,000 24.89 93,524 1,28,000 7,48,000 8.82
STP - Transferee Scheme Duration : 09/01/2012 to 29/12/2017
Weekly STP Amount (Rs.) STP Period No. of Installments Total Amount Invested Total No. Units Accumulated Value as on 25/12/2017 Current value as on 29/12/2017 Profit XIRR (%)
10,000 09/01/2012 to 29/12/2017 312 31,20,000 1,60,272.56 1,00,41,621 1,86,94,960 1,55,74,960 22.91
STP - Total Returns
Total Investment Amount Total Current Value Total Profit XIRR (%)
25,00,000 1,88,22,960 1,63,22,960 20.84

SIP Investment & Wonders of Compounding

Returns SIP TABLE
14% Monthly SIP of Rs. 1,000 Monthly SIP of Rs. 2,000
Year Total Amt Invested Maturity Value Total Amt Invested Maturity Value
10 2X 1,20,000 2,59,069 2,40,000 5,18,138
15 3X 1,80,000 6,05,786 3,60,000 12,11,573
20 5X 2,40,000 13,01,166 4,80,000 26,02,332
25 9X 3,00,000 26,95,826 6,00,000 53,91,653
Return SIP TABLE
14% Monthly SIP of Rs. 4,000 Monthly SIP of Rs. 5,000
Year Total Amt Invested Maturity Value Total Amt Invested Maturity Value
10 2X 4,80,000 10,36,276 6,00,000 12,95,345
15 3X 7,20,000 24,23,145 9,00,000 30,28,931
20 5X 9,60,000 52,04,664 12,00,000 65,05,830
25 9X 12,00,000 1,07,83,306 15,00,000 1,34,79,132
Returns SIP TABLE
14% Monthly SIP of Rs. 10,000 Monthly SIP of Rs. 15,000
Years Total Amt Invested Maturity Value Total Amt Invested Maturity Value
10 2X 12,00,000 25,90,689 18,00,000 38,86,034
15 3X 18,00,000 60,57,863 27,00,000 90,86,794
20 5X 24,00,000 1,30,11,660 36,00,000 1,95,17,490
25 9X 30,00,000 2,69,58,264 45,00,000 4,04,37,396
Returns SIP TABLE
14% Monthly SIP of Rs. 20,000 Monthly SIP of Rs. 25,000
Years Total Amt Invested Maturity Value Total Amt Invested Maturity Value
10 2X 24,00,000 51,81,378 30,00,000 64,76,723
15 3X 36,00,000 1,21,15,725 45,00,000 1,51,44,657
20 5X 48,00,000 2,60,23,320 60,00,000 3,25,29,150
25 9X 60,00,000 5,39,16,528 75,00,000 6,73,95,660

Top-Up SIP

SIP Top-Up is "a facility where an Investor who already has an exisiting SIP in a mutual fund plan has an option to increase the amount of the SIP Instalment by a fixed amount or percentage after specified intervals."

Year Monthly Installment (Rs.) Total Months Regular SIP SIP Top-up SIP increased by Rs.500 on a yearly basis
Total Amount invested(Rs.) Value at the end of the period(Rs.) Total Amount invested(Rs.) Value at the end of the period(Rs.)
3 1000 36 36000 44983 54000 65386
5 1000 60 60000 87342 120000 162579
7 1000 84 84000 143361 210000 318968
10 1000 120 120000 263018 390000 707939
15 1000 180 180000 616366 810000 2023208
20 1000 240 240000 1327073 1380000 4887039

Benifits of Top-Up SIP

  • Protection from Inflation.
  • Fast Compounding to achieve your goal faster.
  • No need to start a new SIP

SIP vs EMI

Housing Loan can be paid in half the period with small SIP (Mutual Fund)

Home Load For 20 Yrs

Loan Amount Rs. 25,00,000 50,00,000 75,00,000 1,00,00,000
Interest % 8.40 8.40 8.40 8.40
EMI Rs. 21,538 43,075 64,613 86,150
Loadn Balance Rs. After 10 Yrs 17,25,906 34,51,811 51,77,717 69,03,622

SIP (Mutual Fund) for the early payment of Housing Loan
(after 10 Yrs)

Loan Amount Rs. 6,500 13,500 20,000 27,000
Rate of Returns % 14 14 14 14
SIP Value 16,83,948 39,97,430 51,81,378 69,94,861

Home Load For 25 Yrs

Loan Amount Rs. 25,00,000 50,00,000 75,00,000 1,00,00,000
Interest % 8.40 8.40 8.40 8.40
EMI Rs. 19,962 39,325 59,887 79,850
Loadn Balance Rs. After 10 Yrs 15,99,683 31,99,367 47,99,050 63,98,734

SIP (Mutual Fund) for the early payment of Housing Loan
(after 15 Yrs)

Loan Amount Rs. 3,000 5,500 8,000 11,000
Rate of Returns % 14 14 14 14
SIP Value 18,17,359 33,31,824 48,46,290 66,63,649

Mutual Fund Schemes

Mutual Fund Schemes for review & reference.

Sr.No Scheme Name Launch Date AUM (Cr.) Rating Returns (%) 1 Year Returns (%) 3 Years Returns (%) 5 Years Since Inception NAV as on 10.07.2023
ELSS (Equity Linked Saving Scheme U/S 80C)
1 DSP Tax Saver Fund Jan-07 10876.84 20.43 25.02 15.32 14.32 90.77
2 Sundaram Tax Saving Fund Mar-96 1002.74 19.70 24.58 12.78 15.88 369.76
3 Canara Robeco Equity Tax Saver Fund Feb-09 5472.69 19.47 24.70 16.07 18.90 126.70
Large Cap - Fund
4 Tata Large Cap Fund May-98 1381.03 20.17 22.82 12.31 15.39 367.71
5 Canara Robeco Bluechip Equity Fund Aug-10 8860.36 19.97 20.40 14.26 12.49 45.59
6 Nippon India Large Cap Fund Aug-08 14171.02 28.07 28.90 14.51 12.17 62.22
7 Kotak Bluechip Fund Aug-10 5375.91 19.02 21.78 13.27 16.37 412.85
Mid Cap - Fund
8 SBI Magnum Midcap Fund Mar-05 8732.60 25.20 35.40 18.46 16.71 168.78
9 Kotak Emerging Equity Fund Mar-07 27871.28 23.34 31.62 17.18 13.96 83.99
10 PGIM India Midcap Opportunities Fund Dec-13 7811.60 16.67 35.10 19.54 17.46 46.88
11 UTI Mid Cap Fund Aug-05 6952.32 21.89 29.82 15.26 15.54 210.09
Large & Mid Cap - Fund
12 HDFC Large and Mid Cap Fund Feb-94 9076.36 26.61 30.82 16.15 12.30 224.88
13 Tata Large & Mid Cap Fund Mar-03 4348.35 26.34 25.44 16.05 21.53 393.39
14 SBI Large & Midcap Fund May-05 11430.57 25.19 28.30 16.16 17.44 432.39
Multi-Cap - Fund
15 Sundaram Multi Cap Fund Oct-01 1905.82 18.53 25.82 13.29 15.38 257.56
16 Baroda BNP Paribas Multi Cap Fund Sep-03 1740.29 23.62 27.80 14.76 16.02 190.35
17 Aditya Birla Sun Life Multi Cap Fund Mar-22 3893.12 19.88 - - 15.36 13.63
Flexi Cap -Fund
18 Parag Parikh Flexi Cap Fund May-13 35964.51 23.32 25.53 18.02 18.53 55.92
19 UTI Flexi Cap Aug-05 25318.47 12.62 20.27 12.09 14.59 248.86
20 ICICI Prudential Flexicap Fund Jul-21 11451.69 20.76 - - 13.06 12.74
Small cap - Fund
21 Canara Robeco Small Cap Fund Feb-19 5985.58 5985.58 42.39 - 25.77 27.37
22 Axis Small Cap Fund Nov-13 13182.54 27.29 35.87 22.18 22.89 72.44
23 Nippon India Small Cap Fund Sep-10 28778.87 37.51 45.97 21.72 20.60 110.39
Focused Fund
24 HDFC Focused 30 Fund Sep-04 4782.85 27.96 30.64 14.30 15.34 146.60
25 Nippon India Focused Equity Fund Dec-06 6358.90 16.99 27.37 13.94 13.96 86.82
26 Franklin India Focused Equity Fund Jul-07 8586.49 22.64 27.58 15.49 13.58 76.32