Mutual Fund Investment for NRIs

Mutual Fund Investment for NRIs

	*Mutual Fund investment for NRIs* -Breaking it down

What is Mutual Fund ?	It’s a POOL OF MONEY
Whose money ?	Investors’ money. Investors may be a corporate body or individuals.
Who pools the money ?	AMCs- Asset management companies. Typically called as FUND HOUSES. For example, UTI, Reliance Mutual Fund, HDFC Mutual Funds etc.
What do the do with the money ?	They invest the money on behalf of the investors. For every fund there is a FUND MANAGER who takes the investment decisions. Instruments ( Like share, bond or money market) of investments depends on the types of the specific fund. For example a diversified equity fund will invest mostly into shares of different companies.
What are the different types of funds ?	On basis of duration ; Two major categories : Open ended & Close ended. Open ended funds allows the investor to redeem/ withdraw his/her investment at any given point of time. Whereas close ended funds allows redemption/ withdrawal only after a specific period of time, called LOCK-IN period.
	On basis of Asset class ; Equity , Debt, Money Market and Hybrid. Equity funds invests mostly into the shares of different companies, Debt funds invest into debt instruments like company debentures, govt bonds or other fixed income instruments. Money market funds invest into govt securities, commercial papers or similar liquid and short term instruments. Hybrid funds invest in any two or more of the above mentioned asset classes together.
	Based of Investment objective ; Growth funds, Balanced funds, Liquid funds, Income funds, Tax-saving funds-also called Equity Linked Savings Scheme or ELSS, Fixed maturity plan or FMP etc
	Mutual funds can also be categorized on the basis of Sector they invest in, any specific theme that are being followed , any specific market they are targeting like Emerging market Funds etc etc

What do the investor get ?	Return on their investments, either in form of capital gain or income like monthly payout or yearly dividends etc

What is the return ?	Mutual fund investments are subject to market risk. No specific percentage of return can be surely predicted or guaranteed.

Is it risky ?	Yes it is. However the investor are free to choose the amount of risk they want to take. They can and should select the funds on basis of their risk bearing capacity. For example, an equity fund may(or may not) produce a higher return than a liquid fund, but also bears the risk of a higher rate of capital loss.

Does it gives tax savings ?	Certain types of funds like ELSS enjoy some tax benefits. Also, dividends received at the hand of the investors are tax free.

What is SIP ?	Systematic Investment Plan ; its basically a monthly investment (like recurring deposit of banks, but in mutual funds) plan where the investor keeps investing a fixed amount of money every month in his/her choice of funds for the predetermined period of time.