Your Money’s Journey After You Invest in Mutual Funds

Pair of shoes standing on a road with arrow

Before investing in a mutual fund, you must have carefully analyzed the schemes, read the offer document and listed sources to track the Net Asset Value (NAV). But, ever wondered what happens to your mutual fund investment ‘behind the scenes’ after you have put your money in it? There is a very systematic process that your mutual fund investment goes through from the time you invest till you exit. 

Here is an account of what happens after you have invested in mutual funds.

First Stage: NAV and Allocation of Units 

The investor can invest in mutual funds either through an Asset Management Company (AMC) or distributor. After the investment is made, the details of the investor are forwarded to Registrars and Transfer Agents (RTAs) who store and maintain the details of investors in the electronic form. RTAs also determine the applicable NAV to your investment and allot units of fund accordingly.

Second Stage: Investment as per the Fund Strategy

The AMC receives the amount invested and details of units allotted against such investment to a particular investor from RTAs. The amount is now invested by the fund manager in accordance with objectives and strategy of the fund in target asset base. Fund managers work with a team of analysts, researchers and experts to make sound investment decisions. 

Third Stage: Safekeeping of Securities and Cash

There are Custodians who is responsible for safekeeping the physical securities and cash. Dematerialized securities are maintained by the Depository Participants registered either under National Securities Depository Limited (NSDL) or Central Depository Services Limited (CDSL). Custodian ensures that securities in which the fund has invested in are delivered to the fund and money for the same is paid out.

Fourth Stage: Fees and Charges

To run its operations, an AMC has to incur significant costs and one its major revenue stream is fees and charges it recovers from its clients. This fee is expressed in terms of percentage of the scheme’s net asset value which is known as the expense ratio. The asset management fee is adjusted from the total investment amount that an investor puts in. Different types of standard charges that a fund charges on its investor are annual maintenance fee, transaction fee, entry load, exchange fee or swap fee. The ceiling on rates to be charged is regulated by the Securities and Exchange board of India (SEBI) which ensures that investors are not charged unfair and a hefty amount depleting their actual investment.

Fifth Stage: Income Generation, Redemption or Exit

Income on mutual fund units is derived from NAV. Total NAV divided by number of units gives the value of each unit which reflects the appreciation or loss per unit held by an investor. Following are the different ways in which an investor earns income from mutual funds:

* Dividend: Funds declare dividends from time to time, and if an investor has opted for dividend option, then he shall be paid dividends as and when they are declared. 

* Growth: For an investor who has opted for growth fund, the dividends shall be re-invested in the fund thereby expanding the investment size.

* Redemption: Another way to earn income on the fund or if you want to exit the fund is to either redeem fund units when the fund matures or sell the units prematurely by placing sell order. The RTAs shall arrive at the amount to be paid to investor considering NAV of the units held. An exit load charge may be deducted from the proceeds depending on the terms of the fund.

Sixth Stage: Income Credit

The proceeds from selling units are either sent by cheque or credited directly into the bank account of investor. As per the regulations, an AMC must dispatch the proceeds within 10 working days from the date of redemption. 

So, as you can see, there are several activities, organizations and people involved in handling your mutual fund investment.

109 COMMENTS

  1. I like the valuable information you supply for your articles.

    I will bookmark your blog and check again right here
    regularly. I’m reasonably certain I’ll learn a
    lot of new stuff proper right here! Good luck for the next!

    cheap flights 3gqLYTc

  2. Hmm it looks like your blog ate my first comment (it was extremely long) so I guess I’ll just sum it up what I wrote
    and say, I’m thoroughly enjoying your blog. I too am
    an aspiring blog writer but I’m still new to the whole thing.
    Do you have any tips and hints for beginner blog writers?
    I’d really appreciate it. y2yxvvfw cheap flights

  3. I do agree with all of the ideas you’ve offered on your post.
    They are very convincing and can certainly work. Still,
    the posts are too brief for novices. May you please extend them
    a bit from next time? Thank you for the post.

  4. It’s a shame you don’t have a donate button! I’d certainly donate to this
    excellent blog! I suppose for now i’ll settle for bookmarking
    and adding your RSS feed to my Google account.
    I look forward to brand new updates and will talk about
    this site with my Facebook group. Chat soon! cheap flights
    2CSYEon

  5. Hello I am so grateful I found your website, I really found you by mistake,
    while I was researching on Bing for something else, Regardless I am here now and would just like to say
    thank you for a tremendous post and a all round thrilling blog (I also
    love the theme/design), I don’t have time to go through
    it all at the minute but I have book-marked it and also added your RSS feeds,
    so when I have time I will be back to read a lot more, Please do keep up the awesome work.
    yynxznuh cheap flights

  6. Write more, thats all I have to say. Literally, it seems as though you
    relied on the video to make your point. You obviously know
    what youre talking about, why waste your intelligence on just posting videos to your site when you
    could be giving us something enlightening to
    read?

  7. Its like you read my mind! You appear to know a lot about this,
    like you wrote the book in it or something. I think that you can do with a few pics to drive the message home a
    bit, but other than that, this is magnificent blog.
    A great read. I’ll definitely be back.

  8. Good day! Do you know if they make any plugins to assist with Search Engine Optimization? I’m trying to get my blog to rank for some targeted keywords but I’m not
    seeing very good gains. If you know of any please
    share. Cheers!

  9. I simply want to mention I am just all new to weblog and actually enjoyed you’re website. Likely I’m likely to bookmark your website . You definitely have good writings. Cheers for sharing your web-site.

  10. I simply want to mention I’m new to blogging and site-building and seriously savored this web page. Probably I’m planning to bookmark your blog post . You actually come with great article content. Bless you for revealing your web page.

  11. One more thing. In my opinion that there are quite a few travel insurance web sites of respectable companies than enable you to enter a trip details and get you the prices. You can also purchase the international holiday insurance policy on the internet by using your credit card. All you need to do is usually to enter your own travel specifics and you can begin to see the plans side-by-side. Merely find the system that suits your finances and needs and then use your credit card to buy the item. Travel insurance online is a good way to start looking for a trustworthy company with regard to international travel insurance. Thanks for revealing your ideas.

  12. I just want to mention I’m new to blogs and honestly liked this web page. Very likely I’m want to bookmark your blog post . You surely come with very good article content. Thank you for revealing your web page.

  13. Good – I should certainly pronounce, impressed with your web site. I had no trouble navigating through all the tabs as well as related info ended up being truly simple to do to access. I recently found what I hoped for before you know it in the least. Quite unusual. Is likely to appreciate it for those who add forums or anything, website theme . a tones way for your client to communicate. Nice task..

  14. What i do not understood is actually how you are not really much more well-liked than you may be right now. You’re so intelligent. You realize thus significantly relating to this subject, produced me personally consider it from numerous varied angles. Its like men and women aren’t fascinated unless it’s one thing to accomplish with Lady gaga! Your own stuffs outstanding. Always maintain it up!

  15. I simply want to tell you that I am just very new to blogging and certainly liked your web blog. Most likely I’m likely to bookmark your site . You really have amazing well written articles. Regards for sharing with us your web page.

  16. This design is incredible! You certainly know how to keep a reader entertained. Between your wit and your videos, I was almost moved to start my own blog (well, almost…HaHa!) Great job. I really enjoyed what you had to say, and more than that, how you presented it. Too cool!

  17. Thank you sharing these wonderful articles. In addition, the ideal travel plus medical insurance plan can often ease those concerns that come with touring abroad. Any medical crisis can in the near future become very expensive and that’s absolute to quickly put a financial burden on the family’s finances. Having in place the suitable travel insurance package prior to setting off is well worth the time and effort. Thanks a lot

  18. Right here is the right webpage for anyone who wants to understand this topic. You understand a whole lot its almost hard to argue with you (not that I personally would want toÖHaHa). You certainly put a new spin on a subject that’s been written about for ages. Wonderful stuff, just excellent!

  19. I blog quite often and I seriously appreciate your content. This article has truly peaked my interest. I am going to book mark your site and keep checking for new details about once per week. I subscribed to your RSS feed too.

  20. It is unusual for me to find something on the net thats as entertaining and fascinating as what youve got here. Your page is lovely, your graphics are great, and whats more, you use reference that are relevant to what you are talking about. You are certainly one in a million, man!

  21. A fascinating discussion is worth comment. I think that you should write more on this subject matter, it may not be a taboo matter but usually people don’t discuss these topics. To the next! Best wishes.

  22. One other important area is that if you are an older person, travel insurance pertaining to pensioners is something that is important to really take into account. The mature you are, the more at risk you’re for making something bad happen to you while in another country. If you are not covered by a number of comprehensive insurance policy, you could have many serious troubles. Thanks for expressing your ideas on this web site.

  23. I do consider all the concepts you have introduced in your post. They’re very convincing and will certainly work. Still, the posts are very short for beginners. Could you please lengthen them a bit from next time? Thanks for the post.

  24. You’re so awesome! I don’t suppose I’ve truly read something like this before. So wonderful to discover someone with a few unique thoughts on this topic. Really.. thanks for starting this up. This web site is one thing that is needed on the web, someone with some originality.

  25. Thanks for making the honest attempt to speak about this. I believe very robust approximately it and want to read more. If it’s OK, as you gain more in depth wisdom, would you thoughts adding extra articles similar to this one with additional information? It might be extremely useful and useful for me and my friends.Maria Mattioli

  26. I truly wanted to post a brief note so as to say thanks to you for the superb advice you are showing at this site. My long internet search has finally been honored with extremely good suggestions to go over with my co-workers. I would mention that most of us readers are quite lucky to dwell in a perfect site with very many special people with very helpful techniques. I feel rather lucky to have come across your webpages and look forward to tons of more thrilling times reading here. Thanks once more for a lot of things.

  27. Very good website you have here but I was curious if you knew of any message boards that cover the same topics talked about in this article? I’d really love to be a part of community where I can get responses from other experienced people that share the same interest. If you have any suggestions, please let me know. Many thanks!

  28. Thanks for sharing excellent informations. Your web-site is so cool. I’m impressed by the details that you’ve on this website. It reveals how nicely you perceive this subject. Bookmarked this website page, will come back for more articles. You, my pal, ROCK! I found simply the information I already searched everywhere and simply could not come across. What a perfect web-site.

  29. Another issue is that video games are normally serious as the name indicated with the most important focus on finding out rather than leisure. Although, we have an entertainment element to keep your children engaged, every game is generally designed to develop a specific group of skills or course, such as mathematics or research. Thanks for your posting.

LEAVE A REPLY

Please enter your comment!
Please enter your name here