Investor Education Series

Mutual Funds

Complete Investor Guide

A comprehensive walkthrough of concepts, operations, pricing, and strategies for smart investing.

Core Concept

What Are
Mutual Funds?

A mutual fund is a pooled investment vehicle that collects money from many investors to create a large corpus.

Managed by professional Fund Managers, this pool is invested in a portfolio of stocks, bonds, or gold to generate returns.

Investors

The Pool

Growth

Why Invest In Them?

Diversification

Reduces risk by spreading capital across multiple sectors instantly.

Professional Mgmt.

Experts track markets and manage portfolios backed by research.

Affordability

Start building wealth with as little as ₹500 via Systematic Plans (SIP).

Liquidity

Redeem units on any business day at the current NAV.

Investments are subject to market risks. Check the Risk-o-meter.

*Read all scheme related documents thoroughly prior to making an investment.

Core Architecture

The 3-Tier Structure

Mutual Funds operate under a strictly regulated hierarchy to ensure investor protection.

Sponsor

The Founder

Establishes the Mutual Fund, contributes capital, and appoints trustees as per SEBI regulations.

Trustees

The Guardians

Holds property in trust and ensures the AMC operates in the best interest of the investors.

AMC

The Managers

Handles investment management, portfolio research, and day-to-day operations of the fund.

Service Ecosystem

Custodian

Safe keeping of portfolio securities

Registrar (RTA)

Investor record-keeping & processing

Auditors & Banks

Financial oversight & payment flows

The Investment Lifecycle

Investors

Pool Capital

The Fund

Invests Corpus

Securities

Generate Value

NAV

Price Computed

Returns

Back to Investor

Types of Mutual Fund Schemes

Schemes are categorized by SEBI based on their investment objective and asset class allocation.

Equity Schemes

Primarily invest in stocks

High Risk Growth
Large/Mid/Small Cap: Based on market capitalization
Flexi/Multi Cap: Invest across caps dynamically
ELSS: Tax saving under Sec 80C (3-yr lock-in)
Sectoral/Thematic: Specific themes (Banking, etc.)

Debt Schemes

Fixed income securities

Low-Mod Risk Income
Liquid/Overnight: Very short term (days/weeks)
Corporate Bond: High rated (AA+ & above)
Gilt Funds: Gov. securities (Zero default risk)
Credit Risk: Lower rated paper for higher yield

Hybrid Schemes

Mix of Equity and Debt

Moderate Risk Balanced
Aggressive Hybrid: 65-80% Equity dominance
Conservative Hybrid: 10-25% Equity, rest Debt
Balanced Advantage: Dynamic allocation
Multi-Asset: Min. 3 asset classes (Gold/Eq/Debt)

Solution & Others

Goal specific & Passive

Varied Risk Passive
Retirement/Children’s: 5-yr lock-in for goals
Index Funds/ETFs: Mimic index (Nifty 50)
Fund of Funds (FoF): Multi-scheme investment
International Funds: Foreign securities
Read Detailed Guide on SEBI Categorization

* Categorization as per SEBI Circular on Categorization and Rationalization of Mutual Fund Schemes.

Investment Valuation

Understanding NAV & Pricing

Real-time valuation mechanisms for mutual fund scheme units.

Net Asset Value (NAV) Calculation

Assets − Liabilities
(Market Value + Accrued Income) − Expenses
Total Units Outstanding
→
Price Per Unit
NAV
Fair Valuation: All investments are “Marked-to-Market” daily to ensure the NAV reflects accurate market conditions.
Operations

Applicable NAV

Processing is strictly governed by Cut-off Times (e.g., 3:00 PM for Equity) to ensure parity among all investors.

Before Cut-off: Same Day
After Cut-off: Next Day
Cost Metrics

Total Expense Ratio

The operational cost of managing the scheme, calculated as a percentage and deducted from the NAV on a daily basis.

Direct Plans offer lower TER for higher yields
Liquidity

Exit Load Penalty

A fee charged for redeeming units before a specified lock-in period (e.g., 1% charge within 365 days).

Redemption Price
NAV − (NAV × Exit Load)
Entry Load: Banned
Daily Update: 11 PM

Ways to Invest & Transact

Choose the right mode based on your cash flow and financial goals.

Most Popular

SIP

Systematic Investment Plan

Invest a fixed amount periodically (monthly/weekly). Instills discipline and averages out cost.

  • Rupee Cost Averaging
  • Power of Compounding
  • Start with ₹500
Best for: Long-term wealth creation
One-Time

Lump Sum

Single Investment

Investing a large amount in one go. Suitable when you have surplus funds (bonus, sale of asset).

  • Timing Risk is High
  • Instant Allocation
  • Good for Debt/Liquid Funds
Best for: Market lows or Debt funds
Strategic

STP

Systematic Transfer Plan

Transfer a fixed amount from one scheme (usually Debt/Liquid) to another regularly.

  • Earn returns on idle cash
  • Mitigates market timing risk
  • Automated rebalancing
Best for: Deploying lump sum into Equity
Income

SWP

Systematic Withdrawal Plan

Withdraw a fixed amount periodically from your corpus. Ideal for regular income.

  • Tax-efficient cash flow
  • Retirees / Pension replacement
  • Capital may erode if withdrawal > return
Best for: Regular income post-retirement

Pro Tip: Use SIP for wealth accumulation during earning years and SWP for income distribution during retirement.

Risk & Return Metrics

Standardized performance evaluation metrics for strategic investment analysis.

Return Measures

CAGR

Smoothed geometric progression of returns over a period longer than one year.

Past performance does not guarantee future results.

Sharpe Ratio

Reward earned per unit of risk taken relative to a risk-free rate.

Compare within peer categories only.

Alpha

Excess return relative to benchmark index, reflecting manager value-add.

Historical alpha does not guarantee outperformance.

Risk Measures

Standard Deviation

Historical volatility measure indicating dispersion from the return mean.

Key indicator of total portfolio risk.

Beta

Sensitivity to market swings; 1.0 implies movement in line with market.

Review sensitivity to broad market swings.

Drawdown

Peak-to-trough decline, essential for assessing potential loss during downturns.

Assists in determining individual risk tolerance.

Debt & Tools

Debt Fund Specifics

Duration: Interest rate sensitivity.
YTM: Anticipated return if held until maturity.

Subject to reinvestment and credit risks.

RISKOMETER

MODERATE RISK
Check Risk Status of Funds
F
Taxation Guide

Taxation of Mutual Funds

Understanding Capital Gains and IDCW implications for Indian Investors.

Capital Gains Structure
Criteria Equity Oriented Non-Equity (Debt)
Holding Period
For Long-Term status
Short Term < 12M

Long Term > 12M
Short Term < 36M*

Long Term > 36M
STCG Tax
Short Term Gains
 15%
+ Cess & Surcharge
 Slab Rate
As per Income Tax Slab
LTCG Tax
Long Term Gains
 10%
Exceeding ₹1.25 Lakh/Yr
No Indexation
 Slab Rate*
New Rules (No Indexation)
IDCW (Dividends)
Taxed at marginal slab rate; Added to total income.
TDS @ 10%
If Dividend > ₹10,000/yr

Tax Saving (ELSS)

Equity Linked Savings Scheme

Deduction up to ₹1.5 Lakhs (Sec 80C) . For the 2026–27 tax year, Equity Linked Savings Schemes (ELSS) are not eligible for tax deductions under the New Tax Regime
3-Year Lock-in (Lowest in Category)
Wealth creation via Equity exposure

Loss Set-off Rules

STCL
Can be set off against both STCG and LTCG.
LTCL
Can ONLY be set off against LTCG.

*Losses can be carried forward for 8 years.

STT Applicable
0.001% on Equity Redemption

*Note: Recent Finance Acts have removed indexation benefits for most debt funds. Consult a tax professional for precise liability calculation.

F
Strategic Framework

Select the Right Scheme

A professional 5-step decision matrix to optimize your investment portfolio.

01

Define Goals & Risk

Goal: Wealth creation, Tax saving, or Income?
Horizon: Short (<3y) or Long (>5y)?
Risk: Can you handle temporary volatility?
02

Choose Category

Equity: For long-term wealth (5+ yrs).
Debt: For capital stability & liquidity.
Hybrid: Balanced mix for moderate risk.
03

Active vs Passive

Active: Aim to beat the benchmark (Alpha).
Passive: Lower cost, mimics index returns.
Passive is trending for Large Cap exposure.
04

Evaluate Portfolio

Quality: Sector spread & credit ratings.
TER: Lower expense ratio = higher returns.
Manager: Professional track record.
05

Check Metrics

Rolling Returns: Consistency over 3/5 years.
Vs Benchmark: Use TRI for fair comparison.
Ratios: Sharpe & Alpha generation.

Golden Rule

Focus on Investment Process over historical performance. Past returns do not guarantee future wealth.

F
Regulatory Standards

Investor Protection & Governance

A robust 3-tier structure ensuring safety, transparency, and fairness in Indian Mutual Funds.

The Watchdog

SEBI (Mutual Funds) Regulations, 1996

Governs all Mutual Funds in India. SEBI mandates strict disclosure norms, investment limits, and uniform valuation standards to protect investor interests.

Board of Trustees

Guardian of Trust

Ensures AMC acts in investors’ best interest. Holds the property of the fund in trust.

2/3rd Independent Directors

Asset Mgmt Co. (AMC)

Investment Manager

Manages funds and takes investment decisions according to scheme objectives.

AMFI Code of Conduct

The Custodian

Safe Keeper

Safe custody of securities and gold. Keeps assets independent of the AMC to prevent misuse.

Independent of AMC
Key Regulatory Policies
Fair ValuationDaily Mark-to-Market
Risk-o-meterStandard Labeling
Side PocketingAsset Segregation
Cut-off TimingNAV Uniformity
Grievance Redressal
1. AMC / RTA Level
2. SEBI SCORES Portal
SCORES: Centralized web-based complaints system.

Industry Body

AMFI

Mutual Fund Industry Body

Non-regulatory body setting industry standards and ethical codes.

ARN Registration Code of Conduct

Key Documents

SIDObjectives, Risks, & Fees
SAIStatutory & Legal details
KIMAbridged SID summary
F
Getting Started Guide

Your Investment Journey

Complete these four steps to build your professional investment folio.

Step 01

KYC Compliance

Verification of identity and address (mandatory one-time process).

  • PAN & Aadhaar Required
  • Video KYC / e-KYC Enabled
Step 02

Bank & Folio

Linking bank accounts and setting up your investment folio structure.

  • Set Autopay (eNACH/UPI)
  • Add Nominee for Security
Step 03

Transact

Placing your first purchase via Lump sum or Systematic Plans (SIP).

  • AMC / RTA Direct Portals
  • Note Cut-off Times for NAV
Step 04

Track & Record

Monitoring performance and maintaining records for taxation.

  • Annual Portfolio Reviews
  • Capital Gains Statements

Pro-Tip: Set up your account today to access institutional-grade research and seamless execution.

Open Axis Direct Account

Plan your wealth accumulation with precision. Determine how your monthly contributions can grow over time.

Calculate My SIP Returns

Optimize your post-retirement cash flow. Evaluate how long your corpus will last with a Systematic Withdrawal Plan.

Estimate My SWP Runway

Access objective, data-driven fund strategies curated by the research desk at Axis Securities Ltd to align with your long-term financial objectives.

Explore ASL’s Research-Backed Selections Start your Mutual Fund Journey
Investment in securities market are subject to market risks. Read all the related documents carefully before investing. Mutual Fund investments are subject to market risks, read all scheme related documents carefully. Axis Securities Ltd (ASL) is a SEBI Registered Investment Adviser. Registration No. INZ000161633.
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