Your Questions

What is KYC Process?

KYC is an acronym for "Know Your Customer" and is a term used for Customer Identification Process as a part of Account Opening process with any financial entity. KYC establishes an investor’s identity & address through relevant supporting documents such as prescribed photo id (e.g., PAN card, Aadhar card) and address proof and In-Person Verification (IPV).

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How do Mutual Funds help manage risk?

Risks appear in many forms. For example, if you own a share of a company, there is a Price Risk or a Market Risk or a Company Specific Risk. The share of just that company may dip or even crash due to any of the above reasons or even a combination of these reasons.

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When should I start investing in Mutual Funds?

There is a beautiful Chinese proverb, “The best time to plant a tree was 20 years ago. The second best time is now.”

There is no reason why one should delay one’s investments, except, of course, when there is no money to invest. Within that, it is always better to use Mutual Funds than to do-it-oneself.

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How will I evaluate my risk profile?

Every individual investor is unique. Not only with regards to investment objectives but even in approach and view of risk. This is what makes Risk Profiling absolutely crucial before investing.

A Risk Profiler is essentially a questionnaire that seeks an investor’s answers to questions about both “ability” and “willingness”.

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Do Mutual Funds invest only in stocks?

Do you visualize roller-coasters or toy trains first when you think of an amusement park? Probably the former. These rides are usually the biggest attractions in such parks which create a certain perception about amusement parks. ‘Mutual funds’ too carry a similar perception that they invest only in stocks and hence are risky.

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What is the co-relation between risk and return?

In Mutual Funds, one often hears, ‘more the risk, more the return’. Is there truth in this?

If ‘risk’ is measured as either, probability of loss of capital or as swings and fluctuations in investment value, then asset classes like equity are undoubtedly the riskiest, and money in a savings bank account or in a government bond is of course least risky.

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What are the benefits of investing in Mutual Funds?

Many of us dread the thought of managing our own investments. With a professional fund management company, people are put in charge of various functions based on their education, experience and skills.

As an investor, you can either manage your finances yourself, or hire a professional firm. You opt for the latter when:

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Are all Mutual Funds risky?

Every investment we make involves a risk, only its nature and degree varies. The same applies to Mutual Funds too.

All Mutual Fund schemes do not carry the same risk when it comes to returns on investment.

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Is there some external help I can get to plan my financial goals?

“My son is in the 9th grade. I am not sure what his interests are or what stream in education he should pursue. Should he go for Science, Commerce or Arts? Can someone help?” Many parents have such concerns. That is where one may approach an education, or a career, counselor, who has evaluated various options available for youngsters.

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Are Mutual Funds offered by Banks?

Banks are in the business of savings and loans while Mutual Funds are for investments. When you put your money in a savings account or in a fixed deposit, you are making savings whereas when you put your money in Mutual Funds, you are making investments. Banking and Mutual Funds are two completely different businesses, requiring specific domain and organizational expertise.

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Are fund managers necessary?

The answer is a huge, resounding YES! It is important to note that experience in managing money/making investments plays a vital role in generating good performance. The more the experience, the better is the probability of making profitable investment decisions.

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Who keeps a record of my investments?

All Mutual Funds in India are regulated by the Securities and Exchange Board of India (SEBI). Mutual Fund regulations clearly define the roles and responsibilities of Asset Management Companies (AMC) and Custodians. It’s vital to remember that every investor has to complete an effective KYC process before investing.

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What happens when you miss SIP payments in-between?

Many investors worry about loss in Mutual Funds if they are unable to make SIP payments during its tenure. Such situations can arise due to many reasons like you are undergoing some financial difficulty or uncertainty about job or business income. It’s natural that under such situations you may not be able to continue with your regular SIP payments.

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How do I know which fund is right for me?

Once an investor has decided to invest in Mutual Funds, he has to make a decision of which scheme to invest in – Fixed Income, Equity or Balanced and which Asset Management Company (AMC) to invest with? 

Firstly, discuss freely with your advisor what your objective is, what time period you’re comfortable with, and what your risk appetite is.

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What is a Mutual Fund?

To many people, Mutual Funds can seem complicated or intimidating. We are going to try and simplify it for you at its very basic level. Essentially, the money pooled in by a large number of people (or investors) is what makes up a Mutual Fund. This fund is managed by a professional fund manager.

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What is Net Asset value (NAV)?

The performance of a particular scheme of a Mutual Fund is denoted by Net Asset Value (NAV). In simple words, NAV is the market value of the securities held by the scheme. Mutual Funds invest the money collected from investors in securities markets. Since market value of securities changes every day, NAV of a scheme also varies on day to day basis.

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What is the benefit of staying invested in the long term?

Invest for long term – an advice routinely given by many Mutual Fund distributors and investment advisors. This is especially true in case of certain Mutual Funds – such as equity and balanced funds.

Let us understand why the professionals give such advice. What really happens in the long term? Is there a benefit of staying invested for long term?

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Can I remove money on all days or only on particular days?

An open end fund permits redemptions on all business days. If a redemption request is handed over at an Investor Service Centre on a non-business day, or after a specified cut-off time, say 3:00 p.m., then it is processed on the next business day. Redemptions are processed at that particular day’s Net Asset Value (NAV).

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Does long term mean less risk?

Investments in Mutual Funds require the appropriate time horizon. Having the right time horizon, not only provides a better chance of getting expected, investment returns, but also lowers the risk in the investment.

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How much of my investment can I withdraw?

Majority of Mutual Fund schemes are open end schemes, which allow an investor to redeem the entire invested amount without any time restrictions.

Only under few instances  schemes impose a restriction on redemption, under extraordinary circumstances, as decided by the Board of Trustees.

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What kind of returns should one expect from Mutual Funds?

Imagine asking: At what speed do vehicles run?

Can you generalize the answer for the whole category? Different vehicles run at different speeds – even within one category, e.g. cars, while a car made for city roads may run at a certain maximum speed, the one made for racing can run much faster.

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How often can I remove my money?

An investor has no restriction on redeeming money from an open ended scheme. While there may be an exit load in certain cases, which impacts final amount realised, all open end schemes offer liquidity as a great benefit.

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How soon can I withdraw my money from Mutual Funds?

Mutual Funds are one of the most liquid assets, i.e. it is one of the easiest to convert into cash. In order to redeem funds through offline mode, the unit holder needs to submit a signed Redemption Request form to the AMC's or the Registrar’s designated office. The form requires details like unit holder’s name, folio number, scheme name, and number of units to redeem.

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How do I get my returns in Mutual Funds?

Like other asset classes, Mutual Funds returns are calculated by computing appreciation in the value of your investment over a period as compared to the initial investment made. Net Asset Value of Mutual Fund indicates its price and is used in calculating returns from your Mutual Fund investments.

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When can I withdraw my investment?

An investment in an open end scheme can be redeemed at any time. Unless it is an investment in an Equity Linked Savings Scheme (ELSS), wherein there is a lock-in of 3 years from date of investment, there are no restrictions on investment redemption.

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What are loads?

On a long-distance road journey, sometimes a toll is charged when you enter the road or the bridge, and sometimes when you exit. In many cases, the toll bridge company is allowed to charge the toll only for a certain number of years to recover the building costs. After that period is over, the company is not allowed to charge the passengers any toll.

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Is there an advantage in investing in funds with an exit load?

Let’s consider a Balanced Fund, which aims to provide growth and capital appreciation from the equity portion, and income and stability from the debt portion. This scheme still carries considerable risk, as the portion of equity could be as high as 75%. This is recommended only for investors with a healthy risk appetite and long term time horizon.

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How do I choose a Mutual Fund?

Imagine asking a travel agent, “How should I choose my mode of transport?” The first thing he/she will say is, “Depends on where you want to go.” If I were to travel to a distance of 5 kms, an auto rickshaw might be the best option, while for a journey from New Delhi to Kochi, a flight might be the best.

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Don’t let money go. Let it grow!

Do different types of Mutual Fund schemes offer different kinds of returns?

“Why should one invest in Mutual Funds? We keep hearing about poor performance of many Mutual Funds. And Mutual Funds offer no guarantees. Given these limitations, is there any reason why someone should consider investing in Mutual Funds at all? Do they perform at all?”

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What is inflation?

Simply put, inflation is the rise in prices over time, relative to the money available. In relatable terms, a certain amount of money buys you much less today, than it did years ago.

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Can Mutual Funds help create wealth?

Business and commerce allows us to create wealth by investing our money with those who are on the path to creating wealth. We can be investors in businesses of entrepreneurs, by investing in stocks of various companies. As the entrepreneurs and the managers run their businesses efficiently and profitably, the shareholders get the benefits.

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Why don't Mutual Funds give a fixed rate of return like a saving account or FD?

The returns in a Mutual Fund portfolio are a function of many things, like the avenues one has invested in, the way various markets move, the ability of the fund management team, and the investment period.

Since many of these factors are uncertain, the returns cannot be guaranteed, unlike a fixed deposit where these factors are absent, at least to some extent.

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Should goals be for the long term only or short term?

Narendra aims to accumulate enough to make the down payment for his dream house. He started an SIP in some Mutual Fund schemes. Though he was falling a tad short, he was comfortable with what he had accrued.

He got a pleasant surprise when his company announced a big cash reward for some star employees, and he was one of them.

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Should retired people invest in Mutual Funds?

Retired people usually have their savings and investments locked up in bank FDs, PPFs, gold, real estate, insurance, pension plans etc. Most of these options are difficult to convert to cash immediately. This may lead to undue stress in case of medical or other emergencies.

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A plan for every goal

Yes, Mutual Funds are ideal to help you plan your life goals!

·   Mr. Rajput eventually wants to move away from the city, into a farmhouse on a hill station when he plans to retire after 15-20 years.

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Aren’t safe investments enough to meet financial goals?

One must keep in mind that the regular expenses as well as the cost for various financial goals rise over a period. If the inflation is at 6% per year, the cost of a goal doubles over approximately 12 years. However, if the inflation is at 7%, the doubling happens roughly in ten years.

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How can one track a Mutual Fund performance?

In this digital and information age, it has become relatively easy to keep track of investment and portfolio performance. While advisors are irreplaceable partners in your financial journey, it is best for investors to have a little knowledge about their own investments. Don’t worry, you don’t have to sit with mind-boggling spread-sheets and graphs.

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What are Mid Cap Funds?

Market capitalisation is the average of full market capitalisation of the stock on all recognised stock exchanges where it’s listed, or the full market capitalisation of the stock on the single exchange where it’s listed. Fund managers invest in companies as per the fund’s investment objective and investors know what they are investing in.

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Mutual Funds vs Shares: What’s the difference?

From where do you get the vegetables for dinner? Do you grow them in your backyard, or purchase it from the nearest mandi/supermarket depending on what you need? Growing your own veggies is a great way of eating healthy food, but effort is spent on seed selection, manuring, watering, pest control, etc.

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Are there different funds for different types of goals?

With so many Mutual Funds schemes in the market, often one may wonder which scheme may be the best. But, understanding the meaning of “best” is more important.

Often, people tend to select the “best” performers of a recent past period – schemes that have delivered highest returns in the recent past.

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How do I fulfill my financial goals?

To begin with, it is important to select the right scheme for your investment need. Look at it this way.

How do you decide what mode of transport you should take when you travel? Whether you want to walk it up, take an auto rickshaw, a train or a flight, it all depends on your destination, on your budget and travel time available.

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Can minors invest in Mutual Funds?

Anyone under the age of 18 (minor) can invest in Mutual Funds, with the help of parents/legal guardians until the age of 18. The minor must be the sole account holder represented by the parent/guardian. Joint holding is not allowed in a minor’s Mutual Fund folio.

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Which Mutual Fund should I choose for long-term investments?

Long-term investments aim to finance distant future goals, like college education, home, retirement, etc. Hence, choose a fund suitable for wealth creation. Long-term goals have a horizon beyond 10 years and equity-oriented schemes(>=65% equity allocation) are the one of the best long-term investment option.

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Do Mutual Funds issue a passbook?

While banks and certain small savings schemes issue a passbook, Mutual Funds do not issue a passbook, they issue an Account Statement instead. The main purpose of a passbook is to keep track of all transactions with a bank: deposit, withdrawals, credit of interest etc.

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How is ULIP different from Mutual Fund?

A ULIP is Unit-Linked Insurance Plan. It is a life insurance policy with an investment component that is invested in various financial markets. The returns generated by the investment component determine the value of the policy. However, the sum assured on the death of the policy holder may not be a function of the market – the minimum sum assured may remain unaffected.

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What is an ELSS?

An ELSS is an Equity Linked Savings Scheme, that allows an individual or HUF a deduction from total income of up to Rs. 1.5 lacs under Sec 80C of Income Tax Act 1961.

Thus if an investor was to invest Rs. 50,000 in an ELSS, then this amount would be deducted from the total taxable income, thus reducing her tax burden.

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What is an ETF?

An ETF is an Exchange Traded Fund, which unlike regular Mutual Funds trades like a common stock on a stock exchange.

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Is it possible to change SIP amount every month?

SIP in Mutual Fund is like running a marathon. Marathon runners practice throughout the year but keep stepping-up their targets every year starting from dream run, moving to half marathon and finally a full marathon. The same goes with SIPs.

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How can I track my investments on a regular basis?

Investors often wonder how to go about tracking the progress of my investments.

It is like chasing a target in a cricket match. In a cricket match, the team batting second knows the equation – how many runs, how many wickets and how many overs.

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How should I choose whether to go for SIP or Lumpsum?

Invest in SIP or a one-time investment (lumpsum)? Choosing one depends on your familiarity with Mutual Funds, the fund you want to invest in and your goal. If you want to invest regularly to accumulate sufficient capital for a goal, invest in a suitable equity scheme through SIP.

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₹ 500 se toh sirf shuruwaat hai

You can start investing in Mutual Funds with just ₹ 500 a month!

People feel that to earn meaningful returns, large sums must be invested in Mutual Funds. Well, you can start by investing as little as 500 per month and gradually increase your investment as your income rises.

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Can I start with ₹ 500, and keep adding?

The popular investment concept for creating wealth is ‘Start Early. Invest Regularly. Stay invested for Long Term’. Even if the investment is as low as ₹ 500, it is important as it marks the beginning of a journey.

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Have Mutual Funds been around for a long time?

Collective and pooled investments have existed in various traditional formats across the world for some time. Mutual Fund as we know it came into existence in 1924, with creation of Massachusetts Investors Trust.

The Mutual Fund industry growth was accompanied by three broad trends:

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What is SIP?

Systematic Investment Plan (SIP) is an investment route offered by Mutual Funds wherein one can invest a fixed amount in a Mutual Fund scheme at regular intervals– say once a month or once a quarter, instead of making a lump-sum investment.

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What are Equity Funds?

An Equity Fund is a Mutual Fund Scheme that invests predominantly in shares/stocks of companies. They are also known as Growth Funds.

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Long term. Short term. Your choice.

Are Mutual Funds ideal for short term or long term?

“Mutual Funds could be a good saving tool for short term.”

“You must be patient with your Mutual Fund investments. It takes time to deliver results.”

People regularly come across both the above statements, which are clearly contradictory.

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So can I invest now, for my vacation 8 months later?

Articles about Mutual Funds are usually written for planning to achieve certain long term specific goals, and investors assume that other goals, especially short term cannot be achieved.

Let us break this myth with an example.

Ramesh, a travel junkie got to satisfy his wanderlust, when the company he worked for achieved success and rewarded its employees with bonuses.

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What are Debt Funds?

A debt fund is a Mutual Fund scheme that invests in fixed income instruments, such as Corporate and Government Bonds, corporate debt securities, and money market instruments etc. that offer capital appreciation. Debt funds are also referred to as Income Funds or Bond Funds.

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What is a Hybrid Fund?

Our choice of meals when we dine depend largely on the time at hand, the occasion and of course, our mood. If we’re in a hurry, say during an office lunch or eating before boarding a bus/train, we may opt for a combo meal. Or if we know a combo meal is famous, we may not bother to go through the menu. A leisurely meal would mean ordering individual items from the menu, as many as we’d like.

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What are interest rates in Mutual Funds?

There’s no free lunch in this world. We pay for every product or service we consume, either directly or indirectly. For instance, you pay a parking fee for the time you use the parking space. When you send a courier, you pay for the weight of the courier and the distance it needs to travel to reach the recipient.

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What are the best Mutual Fund schemes for a five-year period?

Let us understand what could be a proper answer to the above question.

Through numerous interactions with investors, we feel that in most cases the hidden, oft-unexpressed need is to find out the scheme that would deliver outstanding returns over the period that the investor plans to invest.

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Can I change the tenure of my investment after I’ve started investing?

Investing in Mutual Funds through SIP offers a lot of flexibility. Investors can control the amount they want to invest, tenure for which they want to invest, frequency with which they want to invest (weekly, monthly, quarterly, etc.). 

But once you start a SIP, are you bound by the initial choices made until the end of your SIP tenure? 

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What is Systematic Withdrawal Plan (SWP)?

Some people invest in Mutual Funds for a regular income, and they usually look at options of getting a dividend. Thus many schemes, especially debt oriented schemes, have monthly or quarterly dividend options. It is important to note that dividends are distributed from the profits or gains made by the scheme and are in no way guaranteed every month.

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What are Liquid Funds?

On watching the video on the left, you will notice that in all the situations, the money is lying idle for a short period of time. In certain cases, the exact time when the money needs to be taken out may not be known. What does the investor do? Where should the money be parked?

One must consider a few things here:

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At what age should one start investing?

Rahim and Suresh moved to Mumbai as opportunities to earn and spend were higher.

Suresh looked at the income opportunity and decided to enjoy life. Rahim, on the other hand, decided to save and invest his earning, in order to survive in the city.

Rahim was concerned when he learnt about Suresh’s lifestyle and tried explaining him the benefits of saving young with numbers.

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Why should one invest in Mutual Funds?

One should never invest in Mutual Funds, but should invest through them.

To elaborate, we invest in various investment avenues based on our requirements, e.g. for capital growth - we invest in equity shares, for safety of capital and regular income - we buy fixed income products.

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Why was KYC introduced in financial markets?

One of the main reasons for KYC to be introduced in financial markets was to limit/prevent cases of fraud, tax evasion and money laundering. In order to do that, the source and destination in case of any financial transaction must be found out. This is where KYC was strengthened and in cases of investments and bank accounts, these processes were made mandatory and stringent.

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Is it safe to invest in Mutual Funds Online?

Remember the first time you boarded a flight? Did you have butterflies in your stomach or a queasy feeling? Finally, when the flight was air-borne, didn’t you feel reassured? Flying at 30,000 ft, seat belt fastened and a warm cabin crew along with an able pilot to take care of you.

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Won’t I need a large amount to invest in Mutual Funds?

People think that Mutual Funds are elite investments made only for the wealthy. The fact is: one does not need large sum to invest in Mutual Funds, you can start with a sum as low as ₹ 500, or 5000 depending on the kind of fund you choose.

Why keep the minimum amounts as low as these?

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How diverse is the acceptance of Mutual Funds in India?

After its launch in 1964, Mutual Funds have grown to manage assets over 17.37 lakh  crores (as on Jan 31, 2017).

This impressive growth is because of a strong Indian economy, better regulation, entry of reputed Indian and Foreign Asset Managers, and increasing acceptance of Mutual Funds as a preferred asset class amongst Indian investors.

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