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UNDERSTANDING RETURNS FROM MUTUAL FUNDS MEASURING PERFORMANCE While looking at a mutual fund scheme’s performance, one must not be led by the scheme’s return in isolation. A scheme may have generated 10% annualised return in the last couple of years. But then, even the market indices would have gone up in similar way during the same period. Under-performance in a falling market, i.e. when the NAV of the scheme falls more than its benchmark (or the market), is the time when you must review your investment. One must compare the scheme’s return as against its benchmark return.

NEW RULE ON APPLICABLE NAV EFFECTIVE FROM 1ST FEB. 2021 CUT-OFF TIMINGS FOR MUTUAL FUND TRANSACTIONSFor determining applicable Net Asset Value (NAV) for subscription and redemption transactions

WHAT IS A DIRECT PLAN? One may invest in mutual funds DIRECTLY i.e., without involving or routing the investment through any distributor/agent in a ‘Direct Plan’. OR one may choose to invest in mutual funds with the help of a Mutual Fund distributor/agent in what is termed as a ‘Regular Plan’. ‘Direct Plan’ and ‘Regular Plan’ are both part of the same mutual fund scheme, have the same / common portfolio and are managed by the same fund manager, but have different expense ratios (recurring expenses that is incurred by the mutual fund scheme). Direct Plan has lower expense ratio

MYTHS & FACTS ABOUT MUTUAL FUNDS MYTH : MUTUAL FUNDS ARE FOR EXPERTS Fact : In fact, Mutual funds are meant for of common investors who may lack the knowledge or skill set to invest in securities market. Mutual Funds are professionally managed by expert Fund Managers after extensive market research for the benefit of investors. A mutual fund is an inexpensive way for investors to get a full-time professional fund manager to manage their money. MYTH : MUTUAL FUND INVESTMENTS ARE ONLY FOR THE LONG TERM

NET ASSET VALUE (NAV) WHAT IS NAV? NAV stands for Net Asset Value. The performance of a mutual fund scheme is denoted by its NAV per unit. NAV per unit is the market value of securities of a scheme divided by the total number of units of the scheme on a given date. For example, if the market value of securities of a mutual fund scheme is ₹200 lakh and the mutual fund has issued 10 lakh units of ₹ 10 each to the investors, then the NAV per unit of the fund is ₹ 20 (i.e., ₹200 lakh/10 lakh).

SEBI CATEGORIZATION OF MUTUAL FUND SCHEMES As per SEBI guidelines on Categorization and Rationalization of schemes issued in October 2017, mutual fund schemes are classified as – Equity Schemes Debt Schemes Hybrid Schemes Solution Oriented Schemes – For Retirement and Children Other Schemes – Index Funds & ETFs and Fund of Funds – Under Equity category, Large, Mid and Small cap stocks have now been defined.

ADVANTAGES OF INVESTING IN MUTUAL FUNDS 1. Professional Management — Investors may not have the time or the required knowledge and resources to conduct their research and purchase individual stocks or bonds. A mutual fund is managed by full-time, professional money managers who have the expertise, experience and resources to actively buy, sell, and monitor investments. A fund manager continuously monitors investments and rebalances the portfolio accordingly to meet the scheme’s objectives.

RISK FACTORSSTANDARD RISK FACTORS Mutual Fund Schemes are not guaranteed or assured return products. Investment in Mutual Fund Units involves investment risks such as trading volumes, settlement risk, liquidity risk, default risk including the possible loss of principal. As the price / value / interest rates of the securities in which the Scheme invests fluctuates, the value of investment in a mutual fund Scheme may go up or down. In addition to the factors that affect the value of individual investments in the Scheme,

WHAT IS TOTAL EXPENSE RATIO? Under SEBI (Mutual Funds) Regulations, 1996, Mutual Funds are permitted to charge certain operating expenses for managing a mutual fund scheme – such as sales & marketing / advertising expenses, administrative expenses, transaction costs, investment management fees, registrar fees, custodian fees, audit fees – as a percentage of the fund’s daily net assets. All such costs for running and managing a mutual fund scheme are collectively referred to as ‘Total Expense Ratio’ (TER)

MUTUAL FUND SCHEME CLASSIFICATION Mutual funds come in many varieties, designed to meet different investor goals. Mutual funds can be broadly classified based on –