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What are Mutual funds?
A mutual fund pools the money of several investors and invests this in stocks, bonds, money market instruments and other types of securities based on the objective set by the fund. The money is managed by a professional manager who is well versed in making financial decisions in markets so that you don't have to invest time in figuring out how to do it.
What are direct plans? Why should I prefer direct plans over regular?
A relatively less known fact is that every Mutual Fund scheme has two distinct avatars – REGULAR & DIRECT. The two avatars are identical in every sense – they are the same fund to begin with, they follow the same philosophy, are managed by the same fund manager & invest in the same stocks. The difference is only of commissions. An investor who invests in a particular fund via an intermediary: a banking or trading platform or an advisor: is automatically assigned the Regular Avatar. On the other hand, an investor who invests directly with the fund house is assigned the Direct Avatar. While the two investors invest in the exact same fund, their returns are different. The difference is because of expenses. Every fund pays a commission (0.6% - 1.5% in the case of Equity Funds) to an intermediary (your advisor) for getting them business, and this gets factored into the price of a fund purchased through the regular route. The fund house doesn’t have to pay a commission to anyone for an investor who invests direct, and hence the direct avatar doesn’t need to factor in those costs. If one were to look at this difference over long periods – the difference becomes too large to ignore. The only thing Regular about the “Regular Plan”, is that you keep paying this commission regularly, year after year. Piggy makes you invest in the direct plans of mutual funds. As a result, you could invest in the same fund as someone else, and still make more money; simply because you didn’t pay any commission.
How do I know if I am investing in Direct Plans? How do I know if the Scheme / Plan I have invested in is Direct Plan or Regular Plan?
The word “DIRECT” is clearly mentioned in the name of the scheme. Always ensure that you are investing or switching into “DIRECT PLANS” only. Just investing online does not ensure it is Direct Plan investing. In fact, many online brokers charge you upfront “Brokerage” in addition to earning commissions from your investments. So always check: The name itself will have the word ‘Direct’ in it. If it does not have; then it is not a Direct Plan.
Tell me more about Liquid Funds.
Liquid funds provide 8-9% returns and can be redeemed any day after the units have been allocated without any cancellation charges. Liquid funds invest in government securities for less than 91 days. They are the least risky products among Mutual funds. They are similar to Fixed deposits but with the added advantage of no cancellation charges!. So if you invest Rs5000 you'd be earning roughly Rs.1 per day! So in 3 months you'd have earned Rs91-92.
What is growth option in Mutual Funds?
In Growth option, profits earned from the investments of the scheme stay invested in the same scheme. So the investor doesn't receive any profits in between, but the value of the investment keeps growing as the profit increases. This is reflected in the increase of the NAV.
What is dividend option in Mutual Funds?
In Dividend Payout Option,part or whole of the profits earned from the scheme are distributed to the investor as dividends . Once the dividend is distributed the value of the NAV falls to reflect the reduction in the schemes assets. Hence the NAV of the dividend payout option is always less than or equal to the growth option. Please note that it is not mandatory for the scheme to pay out dividends.
What is a SIP?
SIP or Systematic Investment Plan is an automated way of investing in mutual funds. When you invest regularly every month in mutual funds it is nothing but an SIP. Piggy provides flexi SIP features where you can control your installment amounts and dates of SIP and even pause it when needed.
How has Piggy made SIP better?
With Piggy's unique features you can completely control your SIP. Once you begin your SIP with Piggy you can increase and decrease your monthly investment amounts month on month. You can even pause your SIP indefinitely using Piggy. Note: this control is achieved by leveraging your monthly investments as lumpsum investments and hence all the restriction and limits imposed on lumpsum investments apply in case of an SIP through Piggy.
How do I Buy/Invest in Mutual Funds?
Just click on the Mutual Fund scheme you want to invest in. Click on invest button. You can choose between Growth or Dividend option and give the amount to invest. Clicking on confirm will take you to your bank login page. Make the payment and you are done.
What is Piggy cutoff time and NAV applicability for mutual fund transactions?
For non-liquid fund transactions (in a single scheme on a single day by the same person) for amount less than 2 lacs, the cut-off time for the same day’s NAV to be applicable will be 1 PM. Any Transaction received after 1pm will be processed as per NAV of next Business day. Transactions received between 1-2 pm might get allocated same day NAV on best effort basis. Please note that this is the case for transactions in non liquid funds where the amount is less than 2 lacs. For any amount greater than equal to 2 lacs in non liquid funds and for any amount in liquid funds the units are allotted for the date when the fund house receives the funds in their bank accounts. In case of transactions through Piggy all our settlement for money from banks happens on T+1 day or the next day of transactions. This means on the transaction day the money is blocked from your bank account by your bank. But the funds are settled and transferred from the bank only the next business day/ bank working day by our payment gateway provider. This is as per standard operating procedures for net banking transactions. The Securities and Exchange Board of India (SEBI) has special guidance for processing transactions (SEBI Circular No. CIR/IMD/DF/21/2012). The transfer of money to the Asset Management Company’s (AMC) bank account has to be completed by 3 PM for qualifying for the same day’s NAV. Your funds will be remitted to the AMC’s bank account before 3 PM (on a best effort basis) the next day of the transaction as per standard operating procedure. If the money reaches the AMC bank account later due to inter-bank transfer delays, the NAV allotted will be based on discretion of the fund houses. NOTE: For freshly activated profiles, It may take one day extra for successful processing of first transaction.
Should I do a SIP for my ELSS?
Yes.Doing a SIP in general is a good idea. By doing an SIP you can get 2 benefits. One that you'll be able to reduce the market volatility in your investments by investing regularly and not having to time the markets. Two you'll be able to manage your money better once the lock in period of your investments is over. Every monthly SIP you make needs to finish 3 years lock in period before you'll have the ability to remove it. Ideally you should keep your money invested in these funds to keep getting benefits but you do have the option to remove it. So instead of having to remove the money all at once and having to figure out where to invest the complete amount you'll get your access to your money in parts every month in invested order and it'll help you plan your further investments.
What is the locking period in ELSS funds?
The lock in period in ELSS funds is 3 years, which is one of the lowest amongst other tax savings investment. If you are investing through an SIP then units bought in each SIP installment needs to finish 3 years before you have the permission to withdraw or redeem those units.