By investing an equivalent amount at regular intervals, each month for example, the investors do not have to worry about catching market highs and lows, because their monthly contribution will buy more Units when prices are low and fewer Units when prices are high. The net result is that, over a long period of time, their average cost could be lower than the average market price, and when they eventually sell your Units, their gain could be higher than if they had invested a lump sum. Thus, by investing a fixed amount of Rupees at regular intervals, Unit holders can take advantage of the benefits of Rupee Cost Averaging, at the same time saving a fixed amount of Rupees each month.

A Systematic Withdrawal Plan is a strategy that allows the unit holder to withdraw a specified sum of money each month / quarter from his investments in the scheme.

 

An SWP is ideal for investors seeking a regular inflow of funds for their needs. It is also ideally suited to retirees or individuals, who wish to invest a lump sum and withdraw from the investment over a period of time.

Charges levied by fund managers to the investors to cover distribution / sales / marketing expenses are often called loads. The load charged to an investor at the time of an investor's entry into a scheme / fund, by deducting a specific amount from his initial contribution is called an Entry load.

The load charged to an investor at the time of an investor's exit from a scheme / fund, by deducting a specific amount from his redemption proceeds is called an Exit load.

Some funds may also charge different amounts of loads to the investors, depending upon how many years the investor has stayed with the fund; the longer the investor stays with the fund, less the amount of 'exit load' he is charged. This is called 'Contingent Deferred Sales Charge' (CDSC).

A Load Fund is one that charges a percentage of NAV for entry or exit. That is, each time one buys or sells units in the fund, a charge will be payable. This charge is used by the mutual fund for marketing and distribution expenses. Suppose the NAV per unit is Rs.10. If the entry as well as exit load charged is 1%, then the investors who buy would be required to pay Rs.10.10 and those who offer their units for repurchase to the mutual fund will get only Rs.9.90 per unit. The investors should take the loads into consideration while making investment as these affect their yields/returns. However, the investors should also consider the performance track record and service standards of the mutual fund, which are more important. Efficient funds may give higher returns in spite of loads.

A no-load fund is one that does not charge for entry or exit. It means the investors can enter the fund/scheme at NAV and no additional charges are payable on purchase or sale of units.

 

The price or NAV a unit holder is charged while investing in an open-ended scheme is called sales price. It may include sales load, if applicable.

 

Repurchase or redemption price is the price or NAV at which an open-ended scheme purchases or redeems its units from the unit holders. It may include exit load, if applicable.

 

Some Mutual Funds provide the investor with an option to shift his investment from one scheme to another within that fund. The Switch will be effected by way of a redemption of Units from the scheme and a reinvestment of the redemption proceeds in the 'Other Scheme(s)' subject to the compliance of the switch with the redemption rules of this Scheme and the issue rules of the 'other scheme'. The price at which the Units will be switched out of the Scheme, will be based on the applicable redemption price and the proceeds will be invested in the 'other scheme' at the prevailing Public Offer Price (POP) for units in that Scheme. 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.

 

Assured return schemes are those schemes that assure a specific return to the unit holders irrespective of performance of the scheme.

A scheme cannot promise returns unless such returns are fully guaranteed by the sponsor or AMC and this is required to be disclosed in the offer document.

Investors should carefully read the offer document whether return is assured for the entire period of the scheme or only for a certain period. Some schemes assure returns one year at a time and they review and change it at the beginning of the next year.

 

Considering the market trends, any prudent fund managers can change the asset allocation i.e. he can invest higher or lower percentage of the fund in equity or debt instruments compared to what is disclosed in the offer document. It can be done on a short term basis on defensive considerations i.e. to protect the NAV. Hence the fund managers are allowed certain flexibility in altering the asset allocation considering the interest of the investors. In case the mutual fund wants to change the asset allocation on a permanent basis, they are required to inform the unit holders and giving them option to exit the scheme at prevailing NAV without any load.