Money is one of the biggest necessities of life. Today, more than ever before, with rising aspirations, numerous opportunities to spend and longer life spans, merely earning a good income is not enough; it is equally important to invest your money wisely to ensure that it generates a good return. But selecting appropriate financial tools can sometimes be a bit tricky. And, that’s exactly why it always helps to know as much as you can about investing.
What is a mutual fund?
A mutual fund allows a group of people to pool their money together and have it professionally managed, in keeping with a predetermined investment objective. This investment avenue is popular because of its cost-efficiency, risk-diversification, professional management and sound regulation. You can invest as little as Rs. 1,000 per month in a mutual fund. There are various general and thematic mutual funds to choose from and the risk and return possibilities vary accordingly.
- Professional investment management.
- Diversification of Portfolio.
- Low Cost of Investment.
- Convenience and Flexibility to invest any amount anytime.
- Quick and Personalized Services from AMC.
- Ease of Investing.
- High Liquidity.
- Choice of Dividend or Growth Options.
- Tax Savings Funds also available
Federal Bank has tied up with the following leading AMCs in the country:
If you are interested to invest in Mutual funds, please visit any of our branches
Apply for PAN Card Online
Diversification involves holding a wide variety of investments in a portfolio so as to mitigate risks. Mutual funds usually spread investments across various industries and asset classes, constrained only by the stated investment objective. Thus, by investing in mutual fund, you can avail of the benefits of diversification and asset allocation, without investing the large amount of money that would be required to create an individual portfolio.
Mutual funds employ experienced and skilled professionals, who conduct investment research, and analyze the performance and prospects of various instruments before selecting a particular investment. Thus, by investing in mutual funds, you can avail of the services of professional fund managers, which would otherwise be costly for an individual investor.
In an open-ended scheme, unit holders can redeem their units from the fund house anytime, by paying a small fee called an exit load, in some cases. Even with close-ended schemes, one can sell the units on a stock exchange at the prevailing market price. Besides, some close-ended and interval schemes allow direct repurchase of units at NAV related prices from time to time.
Mutual funds offer a variety of plans, such as regular investment, regular withdrawal and dividend reinvestment plans. Depending upon one’s preferences and convenience, one can invest or withdraw funds, accordingly.
Since mutual funds have a number of investors, the fund’s transaction costs, commissions and other fees get reduced to a considerable extent. Thus, owing to the benefits of larger scale, mutual funds are comparatively less expensive than direct investment in the capital markets. *
Mutual funds in India are regulated and monitored by the Securities and Exchange Board of India (SEBI), which strives to protect the interests of investors. Mutual funds are required to provide investors with regular information about their investments, in addition to other disclosures like specific investments made by the scheme and the proportion of investment in each asset class.
*Mutual Funds are subject to market risk. Please read the offer document carefully before investing. Terms and Conditions apply
Systematic Investment Plan (SIP)
Mutual Fund Systematic Investment Plan (SIP) gives an opportunity to create wealth over long term. Systematic Investment Plan is like a Recurring Deposit wherein the investor needs to remit a fixed amount into a chosen scheme for a predefined period. The advantage of SIP is that there is a lot of flexibility to change all these parameters subsequently also based on any change in our Investment Horizon or our expectations from the schemes.
SIP work using two important levers- Power of compounding and Rupee cost averaging
How does Power of compounding work in SIP?
The compounding refers to the re-investment of income at a rate of return to constantly grow the principal amount year after year. Getting the benefit of the Power of Compounding requires the customer to remain invested for a longer period. Starting early in life and remaining invested focusing on specific goals is the basic mantra of investment. An illustration is given below to prove the point:
Suppose a monthly SIP is for Rs 1000 and the fund’s net asset value (NAV) is Rs 10. This will result in 100 units being credited to you. However, next month, on account of volatile market conditions if the fund’s NAV falls to Rs 5, you will get 2,00 units. This will lower your average purchase cost. A SIP helps you to buy more when the stock market is falling and less when it is rising.
SIP – A SMART Investment Option through Federal Bank.
S Specific – Investment amount should based on a financial goal.
M Measurable – Performance disclosures at regular intervals help keep track of your investments.
A Available – Availability of Hand Picked Funds
R Relevant – Relevant schemes according to your requirement
T Timely – Helps you adopt a disciplined approach towards investing
The following documents are required for investing into Mutual funds:
- CAF (Common Application Form)
- Auto Debit/ ECS Mandate forms
- KYC forms (One-time registration of KYC compliance is required for investment across all funds.)
Proof of Identity (POI)
- PAN card with photograph.
- Unique Identifi cation Number (UID) (Aadhaar)/Passport/Voter ID card/Driving license.
- Identity card/ document with applicant’s Photo, issued by any of the following: Central/State Government and its Departments, Statutory/Regulatory Authorities, Public Sector Undertakings, Scheduled Commercial Banks, Public Financial Institutions, Colleges affiliated to Universities, Professional Bodies such as ICAI, ICWAI, ICSI, Bar Council etc. to their Members; and CreditCards/Debit cards issued by Banks.
Proof of Address (POA)
- Passport/Voters Identity Card/Ration Card/Registered Lease or Sale Agreement of Residence/Driving License/Flat Maintenance bill/Insurance Copy.
- Utility bills like Telephone Bill (only land line),
- Bank Account Statement/Passbook -Not more than 3 months old.
- Copy of passport/PIO Card/OCI Card and overseas address proof (Bank Statement) is mandatory.
- PAN card with photograph.
For MICRO SIPs (Resident and NRI) Micro SIPs – the aggregate of installments in a rolling 12 month period or in a financial year i.e. April to March does not exceed Rs 50,000/- Unique Identification Number (UID) (Aadhaar)/Passport/Voter ID card/Driving license
Prevent Unauthorized Transactions in your demat account – Update your Mobile Number with your Depository Participant. Receive alerts on your Registered Mobile for all debit and other important transactions in your demat account directly from NSDL on the same day. Issued in the interest of investors.
KYC is one time exercise while dealing in securities markets – once KYC is done through a SEBI registered intermediary (broker, DP, Mutual Fund etc.), you need not undergo the same process again when you approach another intermediary.
No need to issue cheques by investors while subscribing to IPO. Just write the bank account number and sign in the application form to authorise your bank to make payment in case of allotment. No worries for refund as the money remains in investor’s account
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© The Federal Bank Limited, Regd. Office: Aluva, 2013