FATCA stands for the Foreign Account Tax Compliance Act. Under FATCA, certain financial data of US taxpayers, who invest or earn income via non-US institutions, need to be shared with Internal Revenue Service (IRS). FATCA is a United States Legislation that aims to prevent tax evasion by US taxpayers by using non-US financial institutions and offshore investment instruments.

W.r.t FATCA, Indian government has signed IGA and MCAA respectively for their implementation. As per this agreement, India would be bound to make its financial institutions share financial account details of accountholders who are tax residents in any of the signatory countries. Similarly, India too will get same information through financial institutions of such treaty countries.

All individuals and entities treated as US person for US tax purpose will come under purview of FATCA legislation. The FATCA legislation will also affect certain types of entities with beneficial owners/ controlling persons from US.

Existing investors under FATCA are the ones who have opened folios on or before 30th June 2014.

As per the CBDT press release, the restriction applies to all those investors who have opened folio(s) between July 01, 2014 and August 31, 2015 and have not yet submitted the self-certification under FATCA / CRS.

The redemption request will be rejected, unless all unit holders in the folio submit the self-certification along-with with the redemption – either in physical mode or online.

Yes. The investor can place all types of transactions after PAN for all holders in the folio is remediated for FATCA

Yes, a POA can sign the self-certification on behalf of the investor provided the details mentioned on the self-certification should be of the unit-holder and not POA.

Mutual Fund is an investment tool that pools the savings of multiple investors in one place and invest the same collated amount in many other financial instruments like equities, bonds, government securities, etc. Later specific number of units are issued to investors in proportion to the sum of money invested by them.

W.r.t FATCA, Indian government has signed IGA and MCAA respectively for their implementation. As per this agreement, India would be bound to make its financial institutions share financial account details of accountholders who are tax residents in any of the signatory countries. Similarly, India too will get same information through financial institutions of such treaty countries. Mutual Fund Investments are spread across different sectors and industries, thus helps investors reduce their exposure to risks. Mutual Funds offer wide range of schemes with different objectives.

The Securities and Exchange Board of India (SEBI) regulates the mutual funds industry and issues guidelines to the mutual funds on regular basis to protect the interests of investors. The regulations set by SEBI imply on all mutual funds irrespective of whether they are promoted by a public-sector or a private sector company. All mutual fund companies are equally subject to monitoring and inspections by SEBI.

The performance of a particular scheme of a mutual find is denoted by Net Asset Value (NAV). Net Asset Value is the market value of the securities held by the scheme. Since market value of securities changes everyday, NAV of a scheme also varies on day to day basis. The NAV per unit is the market value of securities of a scheme divided by the total number of units of the scheme on any particular date. For example, if the market value of securities of a mutual fund scheme is Rs 200 Lac and the mutual fund has issued 10 Lac units of Rs 10 each to the investors, then the NAV per unit of the fund is Rs 20.

As per SEBI Regulations, every Mutual Funds must disclose the NAV on a regular basis i.e. on all business days or weekly, based on the type of scheme. Moreover, the latest NAVs of all mutual funds are also updated on the website of Association of Mutual Funds in India (AMFI) www.amfiindia.com and thus the investors can access NAVs of all mutual funds at one place.

A debt fund invests in fixed-income instruments. These include Commercial Paper, Certificates of Deposits, debentures and bonds. While the rate of interest in these instruments stays the same throughout their tenure, their market value keeps changing, depending on how the interest rates in the economy move. A debt fund’s NAV is the market value of its portfolio holdings at a given point in time. As interest rates change, so do the market value of fixed income instruments, and hence, the NAv of a debt fund. Thus, it is a misnomer that the debt fund’s NAV does not fall.

In mutual funds, the investment of investors are pooled to form a common investible corpus and the gain/loss to all investors during a given period are same for all investors. In the case of portfolio management schemes, the investments of an investor remain identifiable to him. Here the gain or loss of investors will be different from each other.

Generally mutual funds do not offer guaranteed returns to investors. Although SEBI regulations allow Mutual Funds to offer guaranteed returns subject to the Fund meeting certain conditions, most funds do not offer such guarantees. In case of a guaranteed return scheme, the sponsor or AMC, guarantees a minimum level of return and makes good the difference if the actual returns are less than the guaranteed minimum. The name of the guarantor and the manner in which the guarantee shall be met must be disclosed in the offer document by the Mutual Fund. Investments in mutual funds are not guaranteed by the Government of India, the Reserve Bank of India or any government body.

I. Schemes as per Maturity Period: Based on the investment period, Mutual Fund Schemes can be categorized as open-ended scheme or close-ended scheme. a. Open-ended Fund/ Scheme - – An open-ended mutual fund does not have any fixed maturity period. Under open-ended mutual fund, there is no limit in number of shares an investor can buy or sell. These mutual funds don’t trade in open market. Everyday, post market hours, open-ended funds are repriced based on the total number of shares bought and sold. Open-ended fund is inexpensive b. Close-ended Fund/ Scheme - This type of scheme has a fixed maturity period and investors can invest only during the launch period of the Fund known as the NFO (New Fund Offer) period. Post that, investors can buy or sell the units of the funds on the stock exchanges where the units are listed. The NAV of close-ended mutual funds are generally disclosed on weekly basis. II. Schemes as per Investment Objective: Based on the investment objective, Mutual Fund Schemes can be categorized as growth scheme, income scheme, or balanced scheme. These schemes may fall in any of the two investment horizons mentioned above i.e. open-ended or close-ended schemes. a. Growth / Equity Oriented Scheme –Individuals you are looking for capital appreciation over a medium to long-term invest in this type of mutual fund schemes. As the name goes, under this scheme, investor’s capital is mainly invested in equities. Thus, compared to another funds, Equity oriented schemes are relatively higher in risk. b. Income / Debt Oriented Scheme –Someone who is looking for a regular and steady income can invest in this type of Mutual Fund Scheme. Income/ Debt Oritented scheme generally invests in fixed income securities such as bonds, corporate debentures, Government securities and money market instruments. Compared to equity schemes debt oriented funds are low in risk. These funds do not react to volatility observed in equity markets. c. Balanced Fund -Balanced funds aim at providing both growth as well as regular income to the investors. Thus, it invests both in equities and fixed income securities. The investment ratio of these funds is mentioned in their offer documents. Someone who is looking for moderate growth, can opt for Balanced Fund schemes. As balanced fund are exposed to equities, they react to the volatility seen in stock market. Nevertheless, its investment in fixed income securities keeps its NAVs less volatile compared to pure equity funds. d. Money Market or Liquid Fund –Investors invested in liquid funds generally are the ones who are looking for easy liquidity, preservation of capital and moderate income. These schemes invest exclusively in safer short-term instruments such as treasury bills, certificates of deposit, commercial paper and inter-bank call money, government securities, etc. Fluctuation observed in the returns on these schemes are much less compared to other funds.These funds are apt for corporate and individual investors, as it helps them park their surplus capital for short periods. e. Gilt Fund -These funds invest exclusively in government securities. Government securities have no default risk. NAVs of these schemes also fluctuate due to change in interest rates and other economic factors as is the case with income or debt oriented schemes.

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.

Sector Specific funds/schemes invest in the specific securities sectors or industries as mentioned in their offer documents. e.g. Pharmaceuticals, IT, Fast Moving Consumer Goods (FMCG), Banking, etc. The profit and/or loss of these funds depends on the performance of their respective sectors/industries. These funds may give higher returns, but are riskier compared to diversified funds. People invested in these funds should keep a watch on the performance of those sectors/industries and must book their profits at right appropriate time. They may also seek advice of an expert.

As per Income Tax Act, 1961, investments made in mutual fund schemes like Equity Linked Savings Schemes (ELSS) and pension schemes are eligible for tax redemption. These schemes pre-dominantly invest in equities, thus risks associated with these schemes are same as equity-oriented scheme. At the same time, the growth opportunities too are high in these Tax Saving Schemes.

The funds who charge a percentage of NAV for entry or exit are called load fund. Everytimean investor buys or sells units in the fund, he’ll be charged a specific amount. Mutual Funds use this amount for marketing and distribution.On contrary, a no-load fund does not charge anything for entry or exit. Which means investors can enter the fund/scheme at NAV and no additional charges are payable on purchase or sale of units.

No, mutual funds cannot increase the load beyond the level mentioned in the offer document. Any change in the load will be applicable only to prospective investments and not to the original investments. In case of imposition of fresh loads or increase in existing loads, the mutual funds are required to amend their offer documents so that the new investors are aware of loads at the time of investments.

The amount that an investor pays towards his investments in an open-ended scheme is called sales price. It may include sales load, if applicable. The price at which an open-ended scheme buys or redeems its units from the unitholders/investors is called repurchase or redemption price. It may include exit load, if applicable.

Yes, a POA can sign the self-certification on behalf of the investor provided the details mentioned on the self-certification should be of the unit-holder and not POA.

Considering the performance of stock market, in order to protect the NAV, fund managers are permitted to alter the asset allocation of their funds i.e. they can invest higher or lower percentage of the fund in equity or debt as to what is mentioned in the fund’s offer document. Such an alteration of asset allocation is allowed only for short term, considering interest of the investors. However, if any mutual fund wants to change the asset allocation permanently, then same has to be first intimated to the unitholders / investors with an option for them to exit the scheme at existing NAV without any load.

Open-ended funds don’t have any lock-in period. However, investments made in tax saving funds are applicable for a minimum lock-in period of 3-years.

Investors can contact the agents and distributors of mutual funds who are spread all over the country for necessary information and application forms. Forms can be deposited with mutual funds through the agents and distributors who provide such services. Investors should not be carried away by commission/gifts given by agents/distributors for investing in a particular scheme. On the other hand they must consider the track record of the mutual fund and should take objective decisions.

Yes, non-resident Indians can also invest in mutual funds. Necessary details in this respect are given in the offer documents of the schemes.

An investor should consider his risk-taking capacity, age factor, financial position, etc. As already mentioned, the schemes invest in different type of securities as disclosed in the offer documents and offer different returns and risks. Investors may also consult financial experts before taking decisions.

An abridged offer document, which contains very useful information, is required to be given to the prospective investor by the mutual fund. The application form for subscription to a scheme is an integral part of the offer document. SEBI has prescribed minimum disclosures in the offer document. An investor, before investing in a scheme, should carefully read the offer document. Due care must be given to portions relating to main features of the scheme, risk factors, initial issue expenses and recurring expenses to be charged to the scheme, entry or exit loads, sponsor’s track record, educational qualification and work experience of key personnel including fund managers, performance of other schemes launched by the mutual fund in the past, pending litigations and penalties imposed, etc.

Mutual funds are required to dispatch certificates or statements of accounts within six weeks from the date of closure of the initial subscription of the scheme. In case of close-ended schemes, the investors would get either a demat account statement or unit certificates as these are traded in the stock exchanges. In case of open-ended schemes, a statement of account is issued by the mutual fund within 30 days from the date of closure of initial public offer of the scheme. The procedure of repurchase is mentioned in the offer document.

A mutual fund is required to dispatch to the unit holders the dividend warrants within 30 days of the declaration of the dividend and the redemption or repurchase proceeds within 10 working days from the date of redemption or repurchase request made by the unit holder. In case of failures to dispatch the redemption/repurchase proceeds within the stipulated time period, Asset Management Company is liable to pay interest as specified by SEBI from time to time (15% at present).

Yes. However, no change in the nature or terms of the scheme, known as fundamental attributes of the scheme e.g. structure, investment pattern, etc. can be carried out unless a written communication is sent to each unit holder and an advertisement is given in one English daily having nationwide circulation and in a newspaper published in the language of the region where the head office of the mutual fund is situated. The unit holders have the right to exit the scheme at the prevailing NAV without any exit load if they do not want to continue with the scheme. The mutual funds are also required to follow similar procedure while converting the scheme form close-ended to open-ended scheme and in case of change in sponsor.

There may be changes from time to time in a mutual fund. The mutual funds are required to inform any material changes to their unit holders. Apart from it, many mutual funds send quarterly newsletters to their investors. At present, offer documents are required to be revised and updated at least once in two years. In the meantime, new investors are informed about the material changes by way of addendum to the offer document till the time offer document is revised and reprinted.

The performance of a scheme is reflected in its net asset value (NAV) which is disclosed on daily basis in case of open-ended schemes and on weekly basis in case of close-ended schemes. The NAVs of mutual funds are required to be published in newspapers. The NAVs are also available on the web sites of mutual funds. All mutual funds are also required to put their NAVs on the web site of Association of Mutual Funds in India (AMFI) www.amfiindia.com and thus the investors can access NAVs of all mutual funds at one place. The mutual funds are also required to publish their performance in the form of half-yearly results which also include their returns/yields over a period of time i.e. last six months, 1 year, 3 years, 5 years and since inception of schemes. Investors can also look into other details like percentage of expenses of total assets as these have an affect on the yield and other useful information in the same half-yearly format. The mutual funds are also required to send annual report or abridged annual report to the unit holders at the end of the year. Various studies on mutual fund schemes including yields of different schemes are being published by the financial newspapers on a weekly basis. Apart from these, many research agencies also publish research reports on performance of mutual funds including the ranking of various schemes in terms of their performance. Investors should study these reports and keep themselves informed about the performance of various schemes of different mutual funds. Investors can compare the performance of their schemes with those of other mutual funds under the same category. They can also compare the performance of equity oriented schemes with the benchmarks like BSE Sensitive Index, S&P CNX Nifty, etc. On the basis of performance of the mutual funds, the investors should decide when to enter or exit from a mutual fund scheme.

The mutual funds are required to disclose full portfolios of all of their schemes on half-yearly basis which are published in the newspapers. Some mutual funds send the portfolios to their unit holders. The scheme portfolio shows investment made in each security i.e. equity, debentures, money market instruments, government securities, etc. and their quantity, market value and % to NAV. These portfolio statements also required to disclose illiquid securities in the portfolio, investment made in rated and unrated debt securities, non-performing assets (NPAs), etc. Some of the mutual funds send newsletters to the unit holders on quarterly basis which also contain portfolios of the schemes.

Yes, there is a difference. IPOs of companies may open at lower or higher price than the issue price depending on market sentiment and perception of investors. However, in the case of mutual funds, the par value of the units may not rise or fall immediately after allotment. A mutual fund scheme takes some time to make investment in securities. NAV of the scheme depends on the value of securities in which the funds have been deployed.

Some of the investors have the tendency to prefer a scheme that is available at lower NAV compared to the one available at higher NAV. Sometimes, they prefer a new scheme which is issuing units at Rs. 10 whereas the existing schemes in the same category are available at much higher NAVs. Investors may please note that in case of mutual funds schemes, lower or higher NAVs of similar type schemes of different mutual funds have no relevance. On the other hand, investors should choose a scheme based on its merit considering performance track record of the mutual fund, service standards, professional management, etc. This is explained in an example given below. Suppose scheme A is available at a NAV of Rs.15 and another scheme B at Rs.90. Both schemes are diversified equity oriented schemes. Investor has put Rs. 9,000 in each of the two schemes. He would get 600 units (9000/15) in scheme A and 100 units (9000/90) in scheme B. Assuming that the markets go up by 10 per cent and both the schemes perform equally good and it is reflected in their NAVs. NAV of scheme A would go up to Rs. 16.50 and that of scheme B to Rs. 99. Thus, the market value of investments would be Rs. 9,900 (600* 16.50) in scheme A and it would be the same amount of Rs. 9900 in scheme B (100*99). The investor would get the same return of 10% on his investment in each of the schemes. Thus, lower or higher NAV of the schemes and allotment of higher or lower number of units within the amount an investor is willing to invest, should not be the factors for making investment decision. Likewise, if a new equity oriented scheme is being offered at Rs.10 and an existing scheme is available for Rs. 90, should not be a factor for decision making by the investor. Similar is the case with income or debt-oriented schemes.On the other hand, it is likely that the better managed scheme with higher NAV may give higher returns compared to a scheme which is available at lower NAV but is not managed efficiently. Similar is the case of fall in NAVs. Efficiently managed scheme at higher NAV may not fall as much as inefficiently managed scheme with lower NAV. Therefore, the investor should give more weightage to the professional management of a scheme instead of lower NAV of any scheme. He may get much higher number of units at lower NAV, but the scheme may not give higher returns if it is not managed efficiently.

Almost all the mutual funds have their own web sites. Investors can also access the NAVs, half-yearly results and portfolios of all mutual funds at the web site of Association of mutual funds in India (AMFI) www.amfiindia.com. AMFI has also published useful literature for the investors. Investors can log on to the web site of SEBI www.sebi.gov.in and go to "Mutual Funds" section for information on SEBI regulations and guidelines, data on mutual funds, draft offer documents filed by mutual funds, addresses of mutual funds, etc. Also, in the annual reports of SEBI available on the web site, a lot of information on mutual funds is given. There are a number of other web sites which give a lot of information of various schemes of mutual funds including yields over a period of time. Many newspapers also publish useful information on mutual funds on daily and weekly basis. Investors may approach their agents and distributors to guide them in this regard.

Yes. Individual investors can appoint a nominee for his investments on their own behalf singly or jointly. However, Non-individual investors including society, trust, body corporate, partnership firm, Karta of Hindu Undivided Family, holder of Power of Attorney cannot appoint nominee to their investments.

In case of winding up of a scheme, the mutual funds pay a sum based on prevailing NAV after adjustment of expenses. Unit holders are entitled to receive a report on winding up from the mutual funds which gives all necessary details.

Investors would find the name of contact person in the offer document of the mutual fund scheme whom they may approach in case of any query, complaints or grievances. Trustees of a mutual fund monitor the activities of the mutual fund. The names of the directors of asset management company and trustees are also given in the offer documents. Investors can also approach SEBI for redressal of their complaints. On receipt of complaints, SEBI takes up the matter with the concerned mutual fund and follows up with them till the matter is resolved. Investors may send their complaints to: Securities and Exchange Board of India Mutual Funds Department, Mittal Court 'B' wing, First Floor, 224, Nariman Point Mumbai - 400 021. Phone: 2850451-56, 2880962-70

Systematic Investment Plan is a mutual fund investment plan that helps you to create wealth, by investing a small sum of money on a monthly basis for a fixed period of time. In SIP, a fixed amount of money (as recommended by investor) is debited periodically from the investor’s bank and is invested in a specific plan.

The benefits of investing in SIP are - • Helps to inculcate financial discipline of your money. • Helps to put the investment plans on your priority list. • Early & regular investments can help you to compound the wealth. • It averages out the capital invested, therefore reduces the risk. • Rupee Cost Averaging is the significant reason for choosing the SIP, allowing to gain maximum benefits on his/her investments over time.

Way2Wealth offers you a facility to get enrolled in the systematic investment plan (SIP) on a monthly or quarterly basis. You can deposit the cheque periodically or the bank will automatically debit the amount from your account. We will provide you a statement of your account on every transaction.

SIP can be started at any point of the time and at any state of the market. The idea of SIP is to avoid timings of the market and start investing with a purpose. Due to rupee cost averaging maximum benefits are attained irrespective of the market's condition.

No. You can invest as much amount as you want, there is no upper limit to the SIP amount. Due to its compounding ability, big investments can lead you to large wealth, so investing big amounts is rather a good option.

Yes, you can. In case you miss an SIP due to insufficient balance in your account, you can just pay it in the following month, and your SIP will continue as normal. However, you can avail the non-payment of SIP only for specific number of times. If you exceed the number of permitted ‘subsequent non-payments’ of SIP then your SIP will get automatically terminated. Please check the scheme offer document for the same.

All mutual funds can accept both SIP and lump-sum investments. If you want to invest in both SIP and lump-sum on the same day you can do it. And if you already have a SIP account and wish to invest more amount in that, you can do that

You can extend the tenure of your SIP anytime between its start and end date. All you need to do to extend the duration of your SIP is fill up the SIP form with your existing portfolio number and the new time period. However, if you decide to extend your SIP tenure at its maturity, you can still do so by filling a renewal form.

SIP is not risk-free, but is relatively less risky when compared to other modes of investment.

When the investment is done at regular intervals, different units will accumulate according to the market level. When an equal sum is invested every month, then the amount will be averaged based on different Net Asset Value (NAV). For e.g. if you have invested in SIP, and you have 15 NAV in the first month and 13 in the second month, then its overall average will be 14.(this is a copy-paste content and is not clear. Please explain this better way).

Yes, you can switch from one scheme to another by clearly indicating the SIP instructions and by giving a switch request. If it is clear, then the switch request will be granted, and investment will be made according to the new scheme otherwise it will continue according to the old scheme.

One can start with an SIP investment with a minimum amount of Rs. 500 per month.

The exit load of the particular scheme is applicable for the SIP redemption.

Equity Linked Savings Scheme (ELSS) is tax saving mutual fund schemes. Under section 80C of the Income Tax Act, an investor can save tax by investing uptoRs. 1.5 Lakh towards ELSS investments. This mutual fund scheme comes with a 3-years lock-in period. ELSS funds pre-dominantly invest in stock markets.

Equity Linked Savings Scheme (ELSS)funds are one of the best practices followed for tax saving under Section 80C. In addition to tax benefit, one invested in ELSS also gets the potential growth of the equity markets. The long-term capital gains from ELSS funds too are tax-free. Moreover, compared to other tax saving options, ELSS has the shortest lock-in period of three years.

Like equity oriented funds, ELSS funds too invest in stocks markets thus are exposed to similar risks. In addition, ELSS funds have a 3-year lock-in period after investment during which the money from the fund cannot be taken out.

All tax-saving investments have lock-in periods ranging from 3 to 15 years. A lock-in period means you cannot withdraw your invested amount before the expiry of the specified time period.

In the growth option, profits made by the scheme are invested back into it. This results in the net asset value (NAV) of the scheme rising over time. When the scheme gains, the NAV rises and in case of a loss, it goes down. The only option to realise the profit in the growth option is to sell or redeem your investments. The dividend option does not re-invest the profits made by the fund. Profits or dividends are distributed to the investor from time to time. The amount and frequency of dividends is never guaranteed. Dividends are declared only when the scheme makes a profit and it is at the discretion of the fund manager. The dividend is paid from the NAV of the unit.Those who want to create wealth or have a goal to fulfill over a longer period of time should choose the growth option. Typically, those with regular income flow are advised to invest in the growth option. Those looking for a regular income such as retirees, should pitch for the dividend option. There is no long-term capital gains tax on equity-oriented mutual fund schemes. The short-term capital gains tax is 15 per cent. If you stay invested in a growth scheme for more than a year, your investment will be tax-free. For those opting for a dividend option, the dividend declared by mutual funds would be tax-free at the hands of the unitholders. Dividend distribution tax is paid by the fund house at 14 per cent.

In the highest tax bracket of 30%, you can save a maximum of up to Rs. 45,000/- as taxes by investing a maximum of Rs.1.5 lac under Section 80C of the Income Tax Act, in the year of investment.

While tax savings is just one avenue of ELSS funds, they also offer you the following benefits: • It gives an opportunity to compound your money by investing in the equity market. • The returns from ELSS funds are Long-term capital gains and hence are tax free. • The lock-in period is only 3 years. • Investing in ELSS funds through SIP helps in – o Rupee Cost Averaging o Reaping benefits of power of compounding in long run. o Planning tax in the most efficient way. o Save every month reducing pressure of investing huge lumpsum at the end of the financial year.

Asset allocation is an investment approach which helps an investor lower his risks by planning his investments in a balanced manner.

Asset allocation helps you divide your investments across different assets classes based on your requirements, goals, risk appetite, etc. Before you make any investment, it is important to consider your current financial condition in totality. Moreover, the liabilities, needs, of every individual may vary from time to time. Therefore, it is even more important to review your financial condition and investments on regular basis and maintain a good balance. Asset allocation helps in maintain same balance thus helps keeps you away from any financial crisis like situation.