FAQ on Mutual Funds

A Mutual Fund is a body corporate that pools the savings of a number of investors and invests the same in a variety of different financial instruments, or securities. The income earned through these investments and the capital appreciation realised by the scheme are shared by its unit holders in proportion to the number of units owned by them. Mutual funds can thus be considered as financial intermediaries in the investment business who collect funds from the public and invest on behalf of the investors. The losses and gains accrue to the investors only. The Investment objectives outlined by a Mutual Fund in its prospectus are binding on the Mutual Fund scheme. The investment objectives specify the class of securities a Mutual Fund can invest in. Mutual Funds invest in various asset classes like equity, bonds, debentures, commercial paper and government securities.

An Asset Management Company (AMC) is a highly regulated organisation that pools money from investors and invests the same in a portfolio. They charge a small management fee, which is normally 1.5 per cent of the total funds managed.

NAV or Net Asset Value of the fund is the cumulative market value of the assets of the fund net of its liabilities. NAV per unit is simply the net value of assets divided by the number of units outstanding. Buying and selling into funds is done on the basis of NAV-related prices. NAV is calculated as follows:

NAV= Market value of the fund's investments+Receivables+Accrued Income- Liabilities-Accrued Expenses
          _______________________________________________________________________________
              Number of Outstanding units

The NAV of a scheme has to be declared at least once a week. However many Mutual Fund declare NAV for their schemes on a daily basis. As per SEBI Regulations, the NAV of a scheme shall be calculated and published at least in two daily newspapers at intervals not exceeding one week. However, NAV of a close-ended scheme targeted to a specific segment or any monthly income scheme (which are not mandatorily required to be listed on a stock exchange) may be published at monthly or quarterly intervals.

1. Qualified and experienced professionals manage Mutual Funds. Generally, investors, by themselves, may have reasonable capability, but to assess a financial instrument a professional analytical approach is required in addition to access to research and information and time and methodology to make sound investment decisions and keep monitoring them.
2. Since Mutual Funds make investments in a number of stocks, the resultant diversification reduces risk. They provide the small investors with an opportunity to invest in a larger basket of securities.
3. The investor is spared the time and effort of tracking investments, collecting income, etc. from various issuers, etc.
4. It is possible to invest in small amounts as and when the investor has surplus funds to invest.
5. Mutual Funds are registered with SEBI. SEBI monitors the activities of Mutual Funds.
6. In case of open-ended funds, the investment is very liquid as it can be redeemed at any time with the fund unlike direct investment in stocks/bonds.

Mutual Funds do not provide assured returns. Their returns are linked to their performance. They invest in shares, debentures and deposits. All these investments involve an element of risk. The unit value may vary depending upon the performance of the company and companies may default in payment of interest/principal on their debentures/bonds/deposits. Besides this, the government may come up with new regulation which may affect a particular industry or class of industries. All these factors influence the performance of Mutual Funds.

Growth Plan and Dividend Plan
A growth plan is a plan under a scheme wherein the returns from investments are reinvested and very few income distributions, if any, are made. The investor thus only realises capital appreciation on the investment. This plan appeals to investors in the high income bracket. Under the dividend plan, income is distributed from time to time. This plan is ideal to those investors requiring regular income.
Dividend Reinvestment Plan
Dividend plans of schemes carry an additional option for reinvestment of income distribution. This is referred to as the dividend reinvestment plan. Under this plan, dividends declared by a fund are reinvested on behalf of the investor, thus increasing the number of units held by the investors.
Automatic Investment Plan
Under the Automatic Investment Plan (AIP) also called Systematic Investment Plan (SIP), the investor is given the option for investing in a specified frequency of months in a specified scheme of the Mutual Fund for a constant sum of investment. AIP allows the investors to plan their savings through a structured regular monthly savings program.
Automatic Withdrawal Plan
Under the Automatic Withdrawal Plan (AWP) also called Systematic Withdrawal Plan (SWP), a facility is provided to the investor to withdraw a pre-determined amount from his fund at a pre-determined interval.

The non refundable fee paid to the Asset Management Company at the time of redemption/ transfer of units between schemes of mutual funds is termed as exit load. It is deducted from the NAV(selling price) at the time of such redemption/ transfer.

Redemption price is the price received on selling units of open-ended scheme. If the fund does not levy an exit load, the redemption price will be same as the NAV. The redemption price will be lower than the NAV in case the fund levies an exit load.

Repurchase price is the price at which a close-ended scheme repurchases its units. Repurchase can either be at NAV or can have an exit load.

Some Mutual Funds provide the investor with an option to shift his investment from one scheme to another within that fund. For this option the fund may levy a switching fee. Switching allows the Investor to alter the allocation of their investment among the schemes in order to meet their changed investment needs, risk profiles or changing circumstances during their lifetime.

After the closure of the Initial Offer Period, on an ongoing basis, the Trustee reserves a right to declare Shut-Out period not exceeding 5 days at the end of each month/quarter/half-year, as the case may be, for the investors opting for payment of dividend under the respective Dividends Plans. The declaration of the Shut-Out period is envisaged to facilitate the AMC/the Registrar to determine the Units of the unitholders eligible for receipt of dividend under the various Dividend Options. Further, the Shut-Out period will also help in expeditious processing and despatch of dividend warrants. During the Shut-Out period investors may make purchases into the Scheme but the Purchase Price for subscripttion of units will be calculated using the NAV as at the end of the first Business Day in the following month/quarter/half-year as the case may be, depending on the Dividend Plan chosen by the investor. Therefore, if investments are made during the Shut -Out period, Units to the credit of the Unitholder's account will be created only on the first Business Day of the following month/ quarter/half year, as the case may be, depending on the dividend plan chosen by the investor. The Shut-Out period applies to new investors in the Scheme as well as to Unitholders making additional purchases of Units into an existing folio. The Trustee reserves the right to change the Shut-Out period and prescribe new Shut- Out period, from time to time.

There is no lock-in period in the case of open-ended funds. However in the case of tax saving funds a minimum lock-in period is applicable. The lock-in period for different tax saving schemes are as follows:

Unit Trust of India was the first mutual fund which began operations in 1964. Other issuers of Mutual funds are Public sector banks like SBI, Canara Bank, Bank of India, Institutions like IDBI, ICICI, GIC, LIC, Foreign Institutions like Alliance, Morgan Stanley, Templeton and Private financial companies like Kothari Pioneer, DSP Merrill Lynch, Sundaram, Kotak Mahindra, Cholamandalam etc.

The performances of Mutual funds are influenced by the performance of the stock market as well as the economy as a whole. Equity Funds are influenced to a large extent by the stock market. The stock market in turn is influenced by the performance of the companies as well as the economy as a whole. The performance of the sector funds depends to a large extent on the companies within that sector. Bond-funds are influenced by interest rates and credit quality. As interest rates rise, bond prices fall, and vice versa. Similarly, bond funds with higher credit ratings are less influenced by changes in the economy.

Choice of any scheme would depend to a large extent on the investor preferences. For an investor willing to undertake risks, equity funds would be the most suitable as they offer the maximum returns. Debt funds are suited for those investors who prefer regular income and safety. Gilt funds are best suited for the medium to long-term investors who are averse to risk. Balanced funds are ideal for medium- to long-term investors willing to take moderate risks. Liquid funds are ideal for Corporates, institutional investors and business houses who invest their funds for very short periods. Tax Saving Funds are ideal for those investors who want to avail tax benefits.
An important aspect while selecting a particular scheme is the duration of the investment. Depending on your time horizon you can select a particular scheme. Besides all this, factors like promoter's image, objective of the fund and returns given by the funds on different schemes should also be taken into account while selecting a particular scheme.

As per SEBI Regulations on Mutual Funds, an investor is entitled to
1. Receive Unit certificates or statements of accounts confirming your title within 6 weeks from the date your request for a unit certificate is received by the Mutual Fund.
2. Receive information about the investment policies, investment objectives, financial position and general affairs of the scheme;
3. Receive dividend within 42 days of their declaration and receive the redemption or repurchase proceeds within 10 days from the date of redemption or repurchase
4. The trustees shall be bound to make such disclosures to the unit holders as are essential in order to keep them informed about any information which may have an adverse bearing on their investments.
5. 75% of the unit holders with the prior approval of SEBI can terminate the AMC of the fund.
6. 75% of the unit holders can pass a resolution to wind-up the scheme.
7. An investor can send complaints to SEBI, who will take up the matter with the concerned Mutual Funds and follow up with them till they are resolved.

The performance of Mutual Funds is evaluated on the basis of absolute increase or decrease in its Net Asset Value (NAV). However a fund's performance should be evaluated on the basis of a comparison with the relevant indices and alternative instruments. The NAV varies from fund to fund. Therefore this argument is not entirely true. However some funds have performed poorly with their NAV quoting well below their original IPO price.

Currently the investment in Mutual fund is available as single mode and the facility of investing in joint holder mode shall be made available in near future.

Yes. The website www.icicidirect.com. provides you a facility to make nomination(s) for your Mutual Fund units purchased online.

No. Nomination details of your linked bank or demat account are not considered for your online mutual fund purchases. Hence, you would be required to make a separate nomination request for your mutual fund folios.

Nomination causes all rights and/or amount(s) payable in respect of your Mutual Fund Holdings to vest in and be transferred to your nominee upon your death. If your legal heir is different from your nominee, your legal heir cannot dispute this action as transfer by the respective AMC(s) in favour of a Nominee acts as valid discharge by the AMC(s) against the legal heir of the deceased holder.

Investors in the Category of "Individuals" are permitted to make a nomination for their mutual fund units. Non-individuals including society, trust, body corporate, partnership firm, Karta of Hindu Undivided Family and a holder of Power of Attorney are not allowed to nominate.

You can nominate any individual as your nominee. However, you cannot nominate the following as your nominee with regard to your mutual fund units:

1. A Trust
2. A Society
3. A Body Corporate
4. A Partnership Firm
5. Karta of a Hindu Undivided Family
6. A Power of Attorney Holder

Yes. A non-resident Indian can be a nominee subject to the exchange controls in force, from time to time.

Yes. You are permitted to nominate a minor. However, if you nominate a minor, do provide the name and address of the minor's guardian in the nomination request.

You can nominate only one person per mutual fund folio held by you.

If you hold more than 1 folio, you can nominate different individuals for each folio but multiple nominees under the same folio is not permitted.

To view the details of your mutual fund folios purchased online visit the Unit Holdings page of the Mutual Fund section of your ICICIDirect trading account.

No. Nomination made in your existing mutual fund folios will not be automatically updated for new folios created for fresh mutual fund purchases made by you. For all new folios, you will be required to make a separate nomination request.

Yes. You can change your nomination at any time before you redeem your mutual fund units. On making a change request, your existing nomination details will be substituted with the new details as provided by you.

Yes. You can cancel your existing nomination at any time before you redeem your mutual fund units.

To make a Nomination request / Change an earlier Nomination, you would be required to fill the prescribed Form (click to download the form).

Update Nominee details form for HSBC
Update Nominee details form for ING

Please fill in all the relevant details and send the duly signed form to the following address:

Attn: Mutual Funds Operations Team
ICICI Securities Limited
Shree Sawan Knowledge Park,
Ground Floor, Plot No. D-507, T.T.C Ind Area,
M.I.D.C, Turbhe, Opp. Juinagar Railway Station,
Navi Mumbai - 400705

NOTE: Your nomination/ change/ cancellation request will be registered only for those folio numbers details of which are mentioned in the Request form.

ICICI Securities Limited shall endeavour to process your request on best effort basis within a reasonable time (7 days from the date of receipt of the duly filled forms at our corporate office).

However, please note that ICICI Securities Limited cannot be held responsible for any delay in processing of your request or loss of documents for reasons beyond the control of ICICI Securities Limited.

The status of your request will be updated by ICICI Securities Limited in the "My messages" section of your ICICIDirect trading account.

In case your request is rejected, the reason(s) for such rejection will also be updated.

No. AMC(s) do not accept any direct/ offline request for nomination or other transactions in mutual fund folios that are purchased online. Hence you will have to route all your transactions including nomination related requests through www.icicidirect.com.

The order book reflects details of all the orders placed by you. All successful transactions will be updated in the Unit Holding link within T+3 or T+5 days (depending on the AMC's rules and regulation)

No. Prior to the implementation of the SEBI guideline, an entry load of 2.25% was charged on all Mutual fund purchases. As per the new guidelines issued by SEBI, with effect from August 1, 2009, entry load will not be charged on purchases in existing mutual fund schemes or on schemes launched thereafter . However, any investment made by you in an NFO which was launched prior to August 1, 2009 will continue to attract entry load and other charges as specified in the offer document.

Exit Load varies for different schemes and is generally charged as a percentage of NAV. The Exit load normally varies between 0.25% to 2% of the redemption value. Some mutual funds however do not charge any exit load. Such mutual funds are referred to as 'No Load Funds'.

SEBI Guidelines stipulate that with effect from August 1, 2009,there shall be no entry load for any Mutual Fund scheme whether existing or new. SEBI Guidelines further stipulate that investors will be required to pay upfront commission directly to distributors. This means that earlier if you invested Rs. 10,000/- in a mutual fund, your total invested amount was reduced to the extent of entry load charged ie Rs.225 ( @ 2.25%) thereby making your actual investment Rs9775/-. However, w.e.f August 1, 2009, the entire Rs. 10.000/- invested by you would be your investment in the mutual fund. However, while you will not be charged any entry load, you will have to pay 'Transaction charges' directly to your distributor as per the applicable fee structure. Click here for more information on the I-Sec Fee structure.

Effective Purchase Price is the sum of the NAV, transaction charges and service charges divided by the number of units purchased. For example: Let's say you purchased 1,000 MF units for Rs. 10,000. If the transaction and service charges applicable are Rs. 100 and Rs. 10.30 respectively, then the effective purchase price per unit will be Rs. 10.11 (i.e. Rs. 10110.30/1000 units). It is the price which you actually pay to purchase a single unit of a Mutual Fund Scheme.

No. Entry load has been abolished only with effect from August 1, 2009. Any investment made by you in an NFO which was launched prior to August 1, 2009 will continue to attract Entry Load and other charges as specified in the offer document.

Yes. Although upfront Transaction Charges and Service Tax(ST) would be charged to you on placing a purchase order in NFO launched prior to August 1, 2009, such charges will be refunded subsequently.

Yes, just as in the secondary market, you will need to allocate funds for the purpose of investing in Mutual Funds. Under the Modify Allocation option you would have a separate section for allocating money for Mutual Funds. Also the funds which are allocated for investments in Mutual Fund will not be allowed for transactions in the secondary market.

Yes, while placing any mutual fund order, modify or cancel option would be available to you till the final confirmation of the order is placed by you. Once you click on Final Confirmation you cannot modify or cancel the order placed by you. You can only modify / cancel any Systematic Investment Plan (SIP) / Systematic Withdrawal Plan (SWP) order placed by you.

As soon as you confirm your order you can view the details of your transaction in the order book. Also an email will be sent to your email address.

Yes, you can transact at any time of the day. However, in order to get the NAV of the current day you would have to transact before the cut-off time of the scheme. If you place any order after the said cut-off time, you would be eligible for NAV of the next day. As per SEBI guidelines the cutoff time for accepting orders in Non-liquid funds is 1500 hrs and in Liquid funds it is 1200 hrs. However taking into account internal transaction processing time, ICICIdirect.com has kept the cutoff time, for accepting orders in Non-liquid funds as 1330 hrs and in Liquid funds as 1030 hrs.

In order to get the NAV of the same day, you can purchase up to the cut-off time of the scheme, after which you will get the next day's NAV. (If the next day is a holiday, then the NAV of the next working day).

As decided by the fund, there is a minimum transaction amount indicated against each scheme. You will get to see the minimum transaction amount in the Place Order screen.

In order to invest in Mutual Fund, you will need to separately allocate funds for the same. This option is available to you in the Modify Allocation screen.

After your first purchase you will not be permitted to transact for a period of 4 to 7 days depending on the processing time of the Mutual Funds' Registrar. After you place an investment order in any Mutual Fund for the first time a Folio Number is generated for that particular fund. Until the Folio number is generated you will not be allowed to place any further orders for that particular Mutual Fund. After the Folio Number is generated you can place any number of order in any schemes of the Mutual Fund.
In the case of Franklin Templeton MF and Birla Sun Life MF, the Folio Number is generated for each scheme offered by the MF. Hence the processing time would be for each scheme of the Mutual Fund. Suppose if you place an order for a Liquid Fund, then a folio number is generated for that scheme only and to place an order for the first time in a balanced fund you will have again wait till a new folio number is generated.

All ICICI Direct customers who are Non-resident Indians, whose accounts are activated, can use the same login Id and password to invest in Mutual Funds.You can invest in units of a Mutual fund from either the Non-Pins NRE or Non-Pins NRO account.

You can contact any ICICI Centre to open accounts or fill in the application form on the web site and our Customer Service Executive will visit you for opening your e-invest account. Once the processing of your form is completed, you can start investing in Mutual Funds online.

You can transfer in your existing mutual fund units to your ICICIdirect account by filling a Transfer-in request form which is available on the site. However this facility of Transfer-in can be availed only if you're a sole holder in the physical units else your request cannot be processed. Transfer In request can be placed through the "Transfer In" link on the Mutual Fund page. Fill in the existing folio number alloted for that scheme. Thereafter you need to take a printout of the duly filled form and forward it to ICICIdirect. In case of transfer-in of dividend schemes, the dividend re-investment option will by default be activated and will appear as "Y". In case the dividend re-investment option as per your records is dividend pay-out "N", to change the dividend re-investment option you can use the modify dividend re-investment hyperlink. The units are converted to electronic form within 30 days. You can check the status of your request the TI Book link. Once the units are converted into electronic form, the same will be updated in the Unit Holdings link.

Click on the link "Place Order " in the MF Trading section. This will take you to all the schemes of the fund. The details of the scheme are indicated against each scheme. Select PURCHASE in the drop down menu and then click on GO to place your purchase order. You can also select the option for dividend reinvestment through the purchase order screen.
In case you are an NRI, first you need to decide is whether you want repatriation benefit or not. If you want repatriation benefit, select the Non-Pins NRE account. Select Non-Pins NRO account if you do not want repatriation benefit.

No, you cannot purchase mutual fund units in the PINS account. You can only do so in the Non-Pins account.

The details of your transactions will be immediately updated in your order book. An email will also be sent to you and the entry in your portfolio will be displayed within T+3 days.

Click on the link "Place Order" in the MF Trading section. This will display all the scheme units held by you, with details against each scheme. Select the REDEEM option in the drop down menu and then click on GO to place your redemption request. You can either redeem a certain amount or specify the number of units held by you. There is a minimum transaction amount that is indicated against each scheme. A cut off time is also displayed to get that day's NAV. The details of your transactions will be immediately updated in your order book, an email will be sent and your bank account will be credited after T+3 days (the date of pay-out would differ for scheme and will not necessarily be T+3 days).

TDS is not deducted on the sale proceeds for Resident Indians.
In case of NRI's, TDS will be deducted on the sale proceeds. The TDS will deducted depending upon whether it is a short-term capital gain or long term capital gains. For short term capital gain the tax is deducted @ 33% while in case of long term capital gains it is deducted @ 11%.

The TDS deducted for NRI can be seen by Clicking on the executed hyperlink against the transaction. You will find the complete details of the redemption including the TDS deducted.

Click on the link "Place Order" in the MF Trading section. This will display all the scheme units held by you, with details against each scheme. Select the SWITCH option in the drop down menu and then click on GO to place your switch request. Click on the scheme you wish to Switch From. There is a minimum transaction amount indicated against the scheme. Also the scheme you wish to "Switch To" carries a minimum transaction amount. Therefore the amount which you will be switching will be higher of the two. The details of your transactions will be immediately updated in your order book, an email will be sent showing the "Switch From" and "Switch To" units. The entry in your portfolio will be displayed within T+3 days. Since this does not involve any transfer of funds, your bank account will not be affected.

Switch Out is treated as redemption. Hence, in case of NRI's, TDS will be deducted on Switch out transaction also. The gross amount after deducting the TDS will be used for switch in Transaction i.e. units worth equivalent to the net amount will be utilized to switching in into the desired scheme.

Select the option "SIP" followed by "Create a Systematic Investment Plan". Select the fund name and the scheme. A screen will appear with the details of that scheme similar to that in the Purchase screen. In addition to these details you will have to fill up the frequency with which the investments will be made and the start date. From the date specified a fixed amount will be debited to your bank account. An email will be sent showing the details of the amount invested and the entry in your portfolio will be displayed within T+3 days. You can however enter into only one plan per scheme. In case you do not have sufficient funds in your account in any specific month, the SIP would be rejected for that particular month

Select the option for "Systematic Withdrawal Plan". Select the fund name and the scheme. A screen will appear with the details of that scheme similar to that in the Redemption screen. In addition to these details you will have to fill up the frequency with which the withdrawals will be made and the start date. From the date specified a fixed amount will be credited to your bank account. An email will be sent showing the details of the amount withdrawn and the entry in your portfolio will be displayed within T+3 days. You can however enter into only one plan per scheme. However if a SWP\AWP request is rejected for insufficient units, then the entire Plan will be scraped automatically. You will also receive an e-mail indicating that the plan has been scrapped.

No, TDS will not be deducted on Dividend payments for both Resident as well as NRI's.

For change of address, you will have to send a letter to us with both the old and new address mentioned in it. All the co-holders should sign this letter. It can be sent by post or faxed to us.

Yes, You can place your request even on a holiday. However, the request would be processed on the next business day and respective NAV would be applicable as per the Mutual Fund's offer document.

For change of address, you will have to send a letter to us with both the old and new address mentioned in it. All the co-holders should sign this letter. It can be sent by post or faxed to us.

You need to provide a separate copy of Request for Change of Address for each of the Fund ( AMC ) held by you in ICICIdirect.com Account.

If you are KYC Compliant, please approach CDSL Ventures Limited ( CVL ) for changing the correspondence address. You can visit CDSL https://www.cvlindia.com for more details.

Please send the filled in form at the below address :

Mutual Fund Operations Team
ICICI Securities Limited
Shree Sawan Knowledge Park,
Ground Floor, Plot No. D-507, T.T.C Ind Area,
M.I.D.C, Turbhe, Opp Juinagar Railway Station,
Navi Mumbai - 400705.

To update the new Bank account at AMC we would require Request for Update Bank Account letter at the below address.

You need to provide a separate copy for each of the Fund ( AMC ) held by you in ICICIdirect.com Account.

Mutual Fund Operations Team
ICICI Securities Limited
Shree Sawan Knowledge Park,
Ground Floor, Plot No. D-507, T.T.C Ind Area,
M.I.D.C, Turbhe, Opp Juinagar Railway Station,
Navi Mumbai - 400705.

If your Residential Status has changed, please provide Change in Tax Status form at the below address. You need to provide a separate copy for each of the Fund ( AMC ) held by you in ICICIdirect.com Account. Please send the request at :

Mutual Fund Operations Team
ICICI Securities Limited
Shree Sawan Knowledge Park,
Ground Floor, Plot No. D-507, T.T.C Ind Area,
M.I.D.C, Turbhe, Opp Juinagar Railway Station,
Navi Mumbai - 400705.

Please provide Folio Consolidation Letter at the below address :

Mutual Fund Operations Team
ICICI Securities Limited
Shree Sawan Knowledge Park,
Ground Floor, Plot No. D-507, T.T.C Ind Area,
M.I.D.C, Turbhe, Opp Juinagar Railway Station,
Navi Mumbai - 400705.

To change the dividend option from normal payout to re-investment or vice -versa, you can place a request on line and need to provide request for Change in Dividend Option for every Scheme that you wish to update.

Please send the request at :

Mutual Fund Operations Team
ICICI Securities Limited
Shree Sawan Knowledge Park,
Ground Floor, Plot No. D-507, T.T.C Ind Area,
M.I.D.C, Turbhe, Opp Juinagar Railway Station,
Navi Mumbai - 400705.

Joint Holder facility is a facility by ICICI Securities Limited (I-Sec) on www.icicidirect.com for making investments in Investment Products in Joint Holding mode.

Investment products like Fixed deposits, Mutual Fund units, GOI Bonds that are offered by I-Sec in it's capacity as a referral agent to a Principal. The term does not include Equity/ Currency /other products traded on the exchanges.

The mode of operation for the joint holding will be 'Anyone or Survivor' only.