Mutual Fund Basics

It is advisable to maintain a contingency fund for any future emergencies. The quantum of such a contingency fund is relative to different individuals depending on their committed payments, lifestyle expenses, etc.

However, as a generic measure, one should maintain a contingency fund equivalent to cover expenses for the current lifestyle for at least six months to have a sufficient financial cushion. Most people park their emergency funds in savings accounts because of liquidity and nil market-linked risks, however, they may offer interest as low as less than 3%.

Exchange Traded Funds (ETFs) are financial products which provide direct investment exposure to benchmark indices and commodities. As per the SEBI Guidelines, an ETF must deploy at least 95% of its assets in securities of the underlying index.  ETFs undertake passive investing, and the fund managers replicate the underlying index and implement changes in the investment portfolio as and when the changes happen in the index constitution.

Exchange Traded Funds (ETFs) are passive investment options that offer direct investment exposure to underlying indices or commodities like silver, gold etc. As per SEBI Guidelines, an ETF must deploy at least 95% of its assets in securities of the underlying index.

Fund managers are mandated to track the specified index and implement changes in the investment portfolio as and when the changes happen in the index constitution. They cannot go beyond the index composition or their respective weights.

Advantages of Exchange Traded Funds

Mutual funds have been steadily emerging as an attractive investment option for retail investors and have become one of the intelligent avenues to invest money. This is because it's convenient to invest in mutual funds, and there are many schemes to choose from.

Across different mutual fund schemes, the investment portfolio may be managed actively or passively. While active investing requires making active investment decisions by the fund managers, passive investing tracks benchmark indices instead of fund managers making independent investment decisions.

In today's world, investors may often feel spoilt for choice amongst the many options available for investing. With a wide variety of mutual funds to choose from, they may struggle to find a suitable scheme for themselves.

Exit load is a charge levied on mutual fund investments if the investor makes a redemption before the end of the specified holding period. It is not uniform across mutual fund schemes; it may differ per the chosen scheme's investment objective and time horizon.

Exit load is applied to protect investors' financial interests, discouraging them from redeeming their investments too early. It may bring an essence of discipline in investors to remain invested for the scheme's minimum applicable time period and reap reasonable returns.

What are liquid funds?

As per Securities & Exchange Board of India (SEBI) guidelines, liquid funds are mutual funds that invest primarily in debt and money market securities with a maturity/residual maturity of up to 91 days. Accordingly, such funds may invest in money market securities like Certificates of Deposits (CDs), Treasury Bills (T-Bills), Commercial Papers, etc.

As per income tax laws, all taxpayers must file their Income Tax Return (ITR) for the previous year, within the prescribed due dates, during the assessment year. The due date for filing tax returns for salaried taxpayers & non-audit businesspersons and professionals is usually July 31. Sometimes this date may be extended by the Finance Ministry.

Since the terms  'financial year', 'previous year' and 'assessment year' are often used in income tax laws, it’s helpful for all taxpayers to know their basic meaning. Read on to know the meaning and importance of these terms.

One may consider active and passive investment products when one plans to invest in financial markets. Active investment products are those where the investment portfolio is being managed actively, with the professional fund management team taking investment decisions after research and due diligence. The objective of an actively managed scheme is to generate alpha, i.e. returns over and above market benchmarks.