One of the prerequisites of investing in mutual funds includes complying with the know your

customer (KYC) norms. Whenever there is a change in any of the KYC details—address,

name and status—which have already been furnished with the KRA, these changes need to

be carried out in order to ensure that the details are updated in the KYC records.

Form

A KYC change form is required to be filled to record changes in these details. This form is

available with the fund house or KRA, or can be downloaded from their websites.

Details

PAN details, name of the person (whose KYC records are to be updated), and date of birth

of the person are required to be filled, irrespective of any change to be made. The form

must always accompany a self­attested copy of the PAN card.

Change in identity

The new name, status (resident/NRI), new PAN, marital status or nationality need to be mentioned in the form and supporting documents

for the same need to be submitted. The supporting documents must be the ones mentioned in the form.

Change in address

This includes new correspondence address, new permanent address, or change in contact details. If utility bills are being submitted as

proof, these should not be more than three months old.

Verification/submission

The form and documents have to be verified by authorised officials of the AMC, R&T agent, KYD compliant mutual fund distributor or

gazetted officer. The copies of all documents should be self attested and accompanied with originals for verification. A copy of the form is

stamped and acknowledged by the KRA.

Points to note

2. In case of an NRI, an authorised Indian bank branch, notary public, court magistrate, judge, Indian embassy of the residing country can attest documents or carry out the in person verification.
3. Proof of address in the name of the spouse can be accepted.
4. Proof documents with a date of expiry should be valid on the date of submission

Foreign investor sentiment has dipped sharply, with FIIs withdrawing over USD7bn of funds so far from Asian equities in 2016 (up to 24 January). This is the highest fund outflow recorded in January since the 2008 global financial crisis.

* FIIs have withdrawn funds worth USD7bn in January, the worst calendar start in the last 7 years.

* Mutual funds took a more defensive stance in December – China’s fund weightings dropped to five-year lows

* India and Taiwan most preferred markets; Telecoms least preferred sector

Foreign institutional investor (FII) flows : The start to the New Year has been rather challenging for the Asian equities. Lacklustre macro numbers and RMB volatility accompanied by a further dip in oil prices have increased uncertainty in the equity markets. Foreign investor sentiment has dipped sharply, with FIIs withdrawing over USD7bn of funds so far from Asian equities in 2016 (up to 24 January). This is the highest fund outflow recorded in January since the 2008 global financial crisis.

FIIs have been net sellers across the Asian markets, with Korea (USD2.4bn) and Taiwan (USD2.4bn), two markets geared to Chinese demand, witnessing the largest outflows. The Philippines (USD97m) has seen the smallest outflow (but then it is also the smallest market in the region).

Mutual funds flow : Mutual funds have also seen withdrawals. EPFR Global tracked funds withdrew USD1.2bn from Asia ex Japan equities in the last 4 weeks (ending 20 January 2016)

Mutual fund holdings: The following charts illustrate how mutual funds – all funds and global-mandated funds – are positioned across the region as of end-December 2015.

Have you been skipping the emails or procrastinating reading the booklet titled factsheet sent each month by your mutual fund asset management company? If you are looking to understand more about the schemes that you have invested in and also get crisp insights into development of the economy and the stock market over the past month, then the factsheet is the right document you should be heading to.

The factsheet is the snapshot carrying all the essential details of the entire basket of schemes managed by a fund house.The details of the fund manager, the time period since when he/she has been managing the scheme and the other schemes handled by them too can be accessed through the factsheet.

The focus of any particular fund is known through the investment objective. The risk-o-meter – segregating funds in five risk buckets – would assist those zeroing down on funds by giving them a peek on the level of risk that the money invested in funds would be exposed to. The box besides the risk-o-meter would specify the type of investors that should be looking to invest in the scheme.

The factsheet is also the best place to know the portfolio of the scheme that you are invested in or are looking to invest in. The portfolio is nothing but the list of top 10-15 investments made by the equity or debt scheme.

The stocks and the sectors that the equity fund manager is upbeat on too would be known by studying the portfolio. Similarly, the quality of papers – A, AA, AA-, AAA – selected by the debt fund manager can be assessed through the portfolio of a debt scheme such as liquid funds, income funds, short-term or dynamic bond fund.

One should examine whether the scheme is heavily invested in any particular stock or sector which is currently in doldrums. For instance, oil marketing companies impacted during the fall in oil prices, agriculture stocks when there is rain deficit.

There are several ratios mentioned in the factsheet. Alpha measures the difference between a fund’s actual returns and its expected performance given the level of risk, and indicates the risk-adjusted performance of a portfolio. On the other hand, Beta measures the sensitivity of a portfolio against its benchmark, which can be in the range of 1, >1 or <1 for equity funds, wherein 1 indicates fund’s NAV will move in same direction as that of benchmark index and that of less than 1 indicates the fund’s NAV would be less volatile than the benchmark index.

Sharpe ratio measures the additional return a fund has generated relative to the risk taken. The higher the sharpe ratio, the better a fund’s return in lieu of the risk. Turnover ratio is another important parameter to take your magnifying glass to, which indicates the number of shares bought or sold by the equity fund over a period.

Toward the end of the details of all individual schemes of a fund house, the growth of systematic investment plan investments in schemes across 1 year, 3 years, 5 years, etc, is elucidated.

The fund factsheet also shows the growth of a standard investment of Rs 10,000 since inception of the fund and over various time periods. You can compare the growth of Rs 10,000 invested in the fund vs the Benchmark returns. When you are comparing the returns of equity schemes don’t form your opinion based on immediate term returns such as 3-month or 6-month returns. Analyse the 3-5 year returns as short-term stock-market volatility may impact the returns, and equity investments are meant for longer horizon.

Consistency of returns over various time period too can be assessed. When pegging them against other schemes, always remember not to compare apples to oranges. So, you cannot weigh the difference in returns of a mid-cap (mid-sized companies) scheme against a large-cap (bigger companies) scheme.

The details of the past couple of dividends doled out by the scheme too can be known from this document. If you are looking to withdraw your investments in a scheme, then keep an eye on the exit load timeline.

The factsheet also makes it easy for you to gauge the shift in focus on sectors over a time period. So, if you want to see whether the past calls of the scheme have been in line with market movements, then you can easily pull out the old factsheets and you would have a treasure trove of information at your disposal

A systematic investment plan (SIP) is designed to continue till the end date mentioned in the application form. A few mutual funds now offer the option to `pause’ the systematic investment for a limited period. This allows the investor to keep the investment habit, while providing temporary liquidity. The SIP restarts automatically after the pause period.

Pause period

SIPs can be paused only for a specific period of time. The shortest and longest periods for which a SIP is allowed to be paused is specified by the AMC.

Form

A SIP Pause form must be filled out by the investor. This form can be obtained from the AMC or the Investor Service Centre. It can also be downloaded from the mutual fund website.

Details

The start date and end date of the pause must be clearly mentioned in the form. The form also asks for details of the existing SIP, as well as the investor’s name and folio number. All unit holders are required to sign the SIP Pause form.

Bank mandate

The form also contains a bank mandate, which needs to be filled in and signed by the investor. The mandate lets the AMC instruct the bank not to debit the investor’s account for the pause period.

Submission

The SIP Pause form has to be submitted to the AMC at least one month prior to the SIP date from which the investor wants to pause the SIP. The form can be submitted at any of the branch offices of the AMC.

Resumption of SIP

After the SIP pause period is over, the SIP will automatically resume with the same conditions as were prevalent when the SIP was in effect.

Points to note

• Not all AMCs offer the `pause’ facility. It is best to check whether the option is available when registering the SIP.
• Mutual funds allow investors to `pause’ an SIP only once during the tenure.
• The facility is not available to investors who have invested through the stock exchage channel or through an online distributor portal.

Unique number allotted after the process can be used to open accounts in other financial institutions

Now, completing know-your-customer (KYC) requirement with one financial institution will be good enough for opening an account with any bank, mutual fund, insurance company, broker, or New Pension Scheme.

The financial sector regulators – Reserve Bank of India (RBI), Securities and Exchange Board of India (Sebi) and Insurance Regulatory and Development Authority of India (Irdai) – have introduced a common KYC form and have asked companies in their domain to upload this data with a central agency – Central Registry of Securitisation Asset Reconstruction and Security Interest of India, or CERSAI.

Once you complete the KYC for opening a new account, you will receive a 14-digit identifier. Thereafter, when you go to any other financial entity for investments, new account, or policy purchase, you can simply quote the KYC identifier rather than doing the KYC process all over again. The institution will use the identifier to get KYC records from the central registry. While RBI and Irdai had given July 15 deadline, Sebi had asked intermediaries to put the system in place by August 1. But, you will need to wait for a month before the system is put in place by the financial institutions. At present, most institutions have been struggling to implement the new norms due to technical glitches.

Financial planners say the centralised KYC will make life convenient for individuals, once implemented. Before the centralised KYC was introduced, financial institutions had different KYC norms – a bank needed different documents than a broker or insurance company. Says Suresh Sadagopan, founder of Ladder7 Financial Advisories: “Regulators have regularly been asking for more information in KYC. Initially, it required Permanent Account Number (PAN) and address proof. Last year, investors were asked to update KYC with more details, including income levels. Then came Foreign Account Tax Compliance Act (Fatca). If there is standardisation, it will save a lot of procedural hassles for customers.” Even within the same industry, there were different sets of requirements. For investments worth up to Rs 50,000, fund houses accepted Aadhaar for KYC. The investor had to submit documents such as passport for amounts bigger than that.

The new standardised KYC form also takes care of the disclosures required under Fatca. Other additional details a person needs to disclose include mother’s name, maiden name, details of related persons in case of minors and the details of directors in case of a company account. “There’s also a column for the third gender and an ‘other’ option for marital status, besides ‘single’ and ‘married’,” says Venu Madhav, chief operating officer, Zerodha.

Experts say that in future, individuals can also have the option to give information pertaining to their new email or phone number in the central registry that will be updated with all financial institutions. This will save the hassle of going to each company, filling up forms to update the details.

What is Mutual Fund

A mutual fund is a common fund or pool of money, created and formed by different people or entities, to invest in stocks, bonds, or government securities etc., as per the wish of all the investors put together. It’s a legal financial institution which connects a group of investors with a common investment objective.

Example- You want to invest in shares and find 10 other people who also wants to invest in shares. You all come together and form a pool of Rs 50000 with all 11 people as investors. This pool of Rs 50000 is a mutual fund, as it is a fund created for mutual benefit.

Some basic features of Mutual fund are

• what is mutual fund- It is a legal common pool of money
• Money from- Investors with a common objective, brings the money to invest
• Investment in- Investment can be in Shares, Bonds, Real estate etc. as per wish of investor
• Units- Investors get units of the mutual fund, for their investment
• Who Does Investment- Expert Fund Manager does all investment
• Who Appoints Fund Manager- Investors
• What About Profits from Investment- All profits from investments are given back to investors

Each investor owns units in the Mutual Fund and income earned from the fund is shared by unit holders in a proportion of their investment.

A Mutual Fund is required to be registered with Securities and Exchange Board of India, which regulates securities markets before it can collect funds from the public. The mutual fund has investments strictly as per investment objective of the fund. Some of the features of mutual funds are –

Some basic benefits of investing in Mutual fund are

• Stress – Stock or bond markets are very volatile and one needs to be very skillful and efficient for profitable investing directly. Whereas in mutual funds, fund manager, and his team takes care of your money and takes the best decision on your behalf. You have to just invest and trust.
• Professional Expert Management- You don’t need to be having any kind of knowledge on the investing. Fund managers will do all the transactions.
• Diversification- A small investor can’t diversify the investment portfolio with small investment surplus. With mutual funds, one can get a diversified portfolio, even with a few investment of Rs 500.
• Small money can be invested – You can start investing in a mutual fund with even Rs500 , which is not possible in case you want to invest in shares. Shares of some of the listed companies trade at higher prices, which can’t be owned by small investing directly with small amounts.
• Tax Benefits- In equity mutual funds, all returns are tax free if investments are held for more than 1 year. Additionally, In ELSS (Equity Linked Saving Schemes) funds, one gets a deduction up to Rs 150000 under section 80C of income tax act.
• Liquidity- Mutual funds are highly liquid. One can buy or sell open-ended mutual fund schemes any time.

Some basic disadvantages of investing in Mutual fund are

• Nil Insurance: Mutual funds are market linked investments. No scheme in India can offer a capital guarantee or minimum returns . Though return depends on the investment objective, nevertheless, mutual funds don’t bring any insurance of principle safety.
• Fees and Expenses: Most mutual fund charges annual fees to meet various kind of expenses. This fee depends on the schemes. Equity mutual fund generally has higher charges, which sometimes can be taxing in bad markets.
• Poor Performance: Performance of mutual fund schemes depend on market and wisdom of fund manager. In case fund manager’s actions goes against the market, it can bring negative surprises.
• Loss of Control: You can not interfere in fund management decisions of a mutual fund scheme. This way investor looses the control of his or her investments.
• Trading Limitations: Though mutual funds are liquid and there are no investing limitations, but there are recent innovations like close-ended mutual fund schemes or ELSS funds which can bring a lot of transaction limitations.
• The inefficiency of Cash Reserves: Mutual funds sometimes can maintain large cash holdings to protect against market fall or to capture any expected opportunity. This can affect the overall performance of the fund as cash holdings don’t give any kind of returns.
• Too Many Choices: There are more than 500 equity funds in India. This creates a lot of problems for a small investor to make a choice.

Both ELSS and PPF are great investments for section 80C deduction of income tax act. However, there are some basic differences one should be understood before taking an investing decision.

Factors	ELSS	PPF
Investment	ELSS is an equity mutual funds which invests primarily in shares or shares related investments	PPF is an investment vehicle which is like fixed deposit for long term period (15 years). One can invest monthly, quarterly or lump sum etc.
Returns	The returns in ELSS is not fixed and is completely dependent on equitymarket’s performance.	The returns obtained are fixed. The present rate of interest is 8.7% compounded annually. However, the rate of interest can change any time as per government policies.
Risk	There is no guarantee of principle safety in ELSS. However, equityinvestments generally give positive returns in long-term. As per our research, BSE SENSEX has delivered an annual return of 12.78% in past 10 years.	It’s government sponsored scheme and it’s completely safe.
Liquidity	Amount Invested in ELSS can be withdrawn any time after 3 years.	PPF have very low liquidity. One can withdraw certain amount after 7th year from PPF account, but overall it’s a scheme for long term investment only.
Tenure	The tenure ranges from three years till any time period as per the choice of investor	The minimum tenure is 15 years which can be increased further in a block of 3 years.
Lock in period	There is lock-in period of 3 years.	The lock-in period in PPF is 15 years. One can’t close PPF before the completion of full 15 years.
Onlinetransaction	ELSS can be done Online. An investor can invest or sell ELSS fund any time	For PPF, some banks have started giving online facility. However, first-time investor has to visit the bank and do the initial registration by submitting documents.

Further, we advise you to consult your advisor or check your risk profile before making any investing decision.

Both ELSS and tax saving fixed deposits are great investments for section 80C deduction of income tax act. However, there are some basic differences one should be understood before taking an investing decision.

Factors	ELSS	Tax Saving FD
Investment	ELSS is an equity mutual funds which invests primarily in shares or shares related investments	It’s special fixed deposit made with any bank for at least 5 years.
Returns	The returns in ELSS is not fixed and is completely dependent on equitymarket’s performance.	The returns obtained are fixed and known to an investor at the time of deposit. Each bank has their own interest rate. Generally it varies from 6.5%-7.5%.
Risk	There is no guarantee of principal safety in ELSS. However, equity investments generally give positive returns on the long-term. As per our research, BSE SENSEX has delivered an annual return of 12.78% in past 10 years.	Tax saving FDs are as safe as Normal fixed deposit of banks.
Liquidity	Amount Invested in ELSS can be withdrawn any time.	Tax saving FDs can’t be withdrawn within 5 years of investment
Tenure	The tenure ranges from three years till any time period as per choice of investor	The minimum tenure is 5 years while the maximum tenure is 10 years.
Lock in period	There is a lock-in period of 3 years in ELSS	There is a lock in period of 5 years involved.
Online	ELSS can be done Online. An investor can invest or sell ELSS fund any time	Some private banks have started offering Tax saving FDs online, but a majority of banks don’t have online facilities.

Further, we advise you to consult your financial advisor or check your risk profile before making an investing decision.

Introduction

The majority of investors consider debt fund as an alternative to the fixed deposits or as a rival to the bank’s fixed deposit. One of the reasons for this misconception is because due to their similar serving nature in the portfolio. But in reality this is not so. There are some crucial differences between the two which every investor should be familiar with. The preliminary differentiation comes in the segment of – safety and taxation, ultimately affecting the returns.

 

Fixed Income		Debt Fund
How to invest?	FD are offered by most of the banks	You could visit or contact a Mutual Fund house when required to invest in a direct plan Also, one can also invest online through brokerage houses, like ICICI, Kotak etc., or through agents. However, this will charge commission around 0.5 per cent.
Liquidity	Moderate:Generally, premature withdrawal is allowed but it usually comes with a penalty of 1 per cent on the interest rates for which the deposit is kept An investor can seek a loan against FD	High: Redemption can be made any day. Usually, there are no charges forredemptions after 1 year. However, an exit load of 1 per cent is generally applicable if the units are redeemed before 1 year
Taxation	As per the current tax slabs (10, 20 or 30 percent) If your interest income exceeds 10,000 a year, the bank will deduct 10.3% from this income	Minimum 10 per cent flat or 20 per cent with indexation (explainedearlier)
Returns	Interest rates on bank fixed deposits (FDs) have touched 7.5-9.0%	The average short-term debt fund has given 9.8% returns in the pastyear, some long-term bond funds have shot up by 14-15% during thesame period. However, returns in the short term could also be negative
Commission/Charges	NIL	A MF usually has a fund management charge of around 0.5%. This can be reduced by investing in direct plans. However, if you have invested through a broker, the broker may also charge you around 0.5%
Interest Rate	Fixed for the entire tenure (Present 7.5-9.0%)	MFs are actively managed and the fund usually seeks to generate returns from various instruments offering different interest rates as per the interest cycles
Underlying Assets	NA	Government bonds, treasury bills, bank bonds, corporate CDs, etc.
Guaranteed Returns	Yes	Theoretically, no, as these funds are linked to the market and subject tointerest rate and credit risks. However, chances of a default are very minimal and hence debts funds are practically safe and give positive returns.

Example:

Let’s understand this with an example: Suppose you had invested 10,000, three years back, i.e. in 2011-12, into a fixed deposit offering an interest rate of 10% p.a. and also in a debt mutual fund, offering same 10% p.a. return for 3 years.

	Fixed deposit (FD)	Debt fund
Invested amount	10,000	10,000
Interest after 3 years	3,331	–
Capital gain after 3 years	–	3,331
Indexed cost*	–	13,044
Taxable capital gain (13,331 – 13,044)	–	287
Tax to be paid:	As per income slab	20% after indexation
10% Slab	333.1	57.4
20% Slab	666.2	57.4
30% Slab	999.3	57.4
Overall Return (20% slab)	12,664.6	13273.6

*Indexed cost refers to the cost of your investment, if you were to invest the same, on the date of selling it. It is calculated using the Cost of Inflation Index (CII).

Conclusion

The goal of any investor is to make wealth to fulfill their needs in the future. For an investor with low-risk appetite, protection of investment amount is very important. However, there should be financial investments for liquidity during emergency. You also need investments for the means of capital appreciation.

• If you seek capital appreciation and tax benefits, along with reasonable safety on capital, then debt funds are the better than fixed deposit.
• If it is the question of capital safety to investor then fixed deposits would be the right option.

Debt mutual funds are suitable for investors who are conservative, not active in the market and require regular income. The debt mutual funds not only provide regular income, but they have various advantages over equity investments and other fixed investments.

Some of the advantages of debt mutual funds are:

• Less volatile than equity market

They are less volatile than equity markets. The debt mutual funds invest in debt securities, where interest income is regular and prices are relatively stable

• More liquid than fixed deposit

They are liquid as compared to fixed deposit as investors can invest and withdrawal, fully or partially, at any time. However, fund houses levy exit load just like fixed deposits

• More investment flexibility than fixed deposits

Debt mutual funds are more flexible than fixed deposits. An Investor can choose to change to other schemes, like from a debt fund to an equity fund, in same fund house

• Returns higher than other debt instruments

The return on debt mutual fund is usually more than Bonds, Fixed Deposits and G-Securities. Changes in interest rates impact the price of bonds. Long-term bonds are more rate sensitive, unlike short-term bonds. Any interest rate cut, eventually shoots up the long-term bond prices, resulting in capital gain to investors

• Taxation Benefits

After three years of investments, a long-term capital gains tax is levied on debt funds at either 10% without indexation or at 20% with indexation. Indexation is adjusting investments for inflation for holding period. The longer the hold period, the higher the benefit of indexation