| 1. |
What is a Mutual Fund? |
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Mutual Fund is essentially a mechanism of pooling together the savings of a large number of small investors for collective investment, with an avowed objective of attractive yields and capital appreciation, holding the safety and liquidity as prime parameters. |
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| 2. |
What is the advantage to the economy? |
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- Channeling the savings of the public
- Helps strengthen and develop a strong capital market
- Thereby contributes to capital formation and the growth of the economy.
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| 3. |
What are the advantages to the investing public? |
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Professional Management |
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Easy Liquidity |
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Reduction / Diversification of Risk |
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Reduction in transaction costs |
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Return Potential |
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Convenience and Flexibility |
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Portfolio Diversification |
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Well Regulated |
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Investor Protection |
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Switchover Facility |
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Low Operating Costs |
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Tax Benefit |
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| 4. |
What are the various types of schemes available in a Mutual Fund? |
4.1 Operational Classification: |
| OPEN ENDED SCHEMES |
CLOSE ENDED SCHEMES |
INTERVAL SCHEMES |
| Accepts funds from investors on continuous basis. |
Schemes are opened for specified time period. |
Basically a close ended scheme with a peculiar feature that every year for a specified period (interval) it is made open. |
| Repurchase facility available. |
Corpus normally does not change throughout the year. |
Prior to and such interval the scheme operates as close ended. |
| No listing in the stock exchange |
Such schemes are normally listed in the stock exchange. Otherwise repurchase facility provided. |
During the said period, mutual fund is ready to buy or sell the units directly from or to the investors. |
| Better liquidity due to continuous repurchase. |
Liquidity normally at the time of redemption. |
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| Sale and Repurchase based on NAV |
Long term investment strategies depending on the life of the scheme. |
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Market price may be below or above par. |
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| 4.2 Classification by Investment Objectives: |
| INCOME SCHEMES |
To maximize the current income is the objective. Periodical income distribution is the feature. Investment in low risk securities. |
| GROWTH SCHEMES |
To achieve capital appreciation is the objective. Investment in growth oriented securities. |
| BALANCED SCHEMES |
To provide current income as well as capital appreciation is the objective. Investment in Equity and Fixed income securities as per the offer document. |
| TAX SAVING SCHEMES |
To provide tax incentives; e.g. Equity Linked Saving Schemes under sec. 88 of Income Tax Act. |
| SECTOR FUNDS |
Investment in securities of certain sector of the economy. The risk is confined to one particular sector. Example: Information Technology Funds – investing only in companies dealing in hardware, software and other related activities. |
| INDEX FUNDS |
The objective is to match the performance of the stock market by tracking an Index that represents the overall market. The investment is in a diversified market index. |
| MONEY MARKET FUNDS |
Investment is in securities of short -term nature, which generally means securities of less than one- year maturity. The major advantages are the Liquidity and safety of principal that the investors can normally expect from short-term investments. |
| GILT FUNDS |
Investment is in government securities. Since the issuer is the Government of India / State, these funds have little risk of default as there is no credit risk involved. |
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| 4.3 Classification by Geography: |
DOMESTIC MUTUAL FUND SCHEMES:
Schemes launched with a view to mobilize savings of the citizens of the country. |
OFF SHORE SCHEMES:
Mutual fund schemes launched with a view to mobilize the savings of the foreign countries for the investments in local markets. |
| Normally collected through the countries enjoying zero status. The aim is normally long- term capital growth by investing in local equities. |
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| 5. |
What is the difference between Fixed Deposits and Mutual Fund schemes? |
| Fixed Deposits |
Mutual Fund schemes |
| Investment for a fixed period |
No fixed tenure in Open ended schemes |
| Assured return on fixed deposits |
No assurance for either returns or capital growth |
| Interest income is taxable |
Income earned by way of distribution from the open ended schemes are exempted from income tax till MARCH 2002. |
| Low returns |
High returns |
| High safety in Banks ; otherwise depends upon rating |
Safety depends upon the investment objective |
| Objective is to earn income |
Objective is to earn income and capital growth. |
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| 6. |
What is a repurchase / redemption? |
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Repurchase is a facility to liquidate the investments made in any of the scheme during the tenor of the scheme by surrendering the unit certificates / statement of accounts at the Net Asset Value of the scheme.
Redemption is the closure of the scheme at the expiry of the tenor of the scheme. |
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| 7. |
What is a Load? |
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The charges made by the fund managers to the investors to cover the distribution / sales / marketing expenses are often called "LOAD". The Load charged to the investor at the time of entry into a scheme is called Entry Load. The Load that the investor pays at the time of exit is called a back-end or Exit Load. |
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| 8. |
What is CDSC? |
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Contingent Deferred Sales Charges (CDSC) is imposed at the time of redemption or repurchase during a specified period .It is a form of load to recover the selling expenses of a fund. |
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| 9. |
What is the risk involved in an Income Scheme? |
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Credit Risk: Risk of default by the issuer of the underlying securities invested by the Fund. Liquidity Risk: At circumstances of extreme volatility the investments become illiquid. Inflation Risk: Erosion in value due to inflation. |
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| 10. |
What are various types of Income Schemes ? |
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Money Market Funds : Investment only in Government Securities and Treasury Bills.
Cash / Liquid Funds : Investment in a combination of money market instruments and short term debt like Commercial Paper of Certificate of Deposits.
The above two funds are ideal to park the surplus funds for short periods.
Bond Funds : Investment in medium to long term Bonds issued by corporate's and governments |
| INCOME FUNDS ARE IDEAL FOR INVESTORS WHO ARE AVERSE TO RISK. |
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| 11. |
Why one should invest in a Growth Fund? |
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Chances of appreciation over time |
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Better hedge against inflation |
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Growth funds have outperformed the other asset class over long term |
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Better than Gold, real estate: due to better liquidity and low transaction cost |
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| 12. |
What is the reason for volatility in Growth Funds? |
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Due to the portfolio mix of stocks |
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Depends upon the degree of diversification in the fund. |
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Extent to which the fund manager tries to hedge |
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Look at equity as a long -term investment. Stocks may go up and down in the short term but in the long term it will always perform. Is it so?
Yes. For e.g. BSE Sensex in
HIGH LOW
| 1992 |
4547 (Apr) |
2709 (Dec) |
| 1994 |
4643 (Sep) |
3576 (May) |
| 1996 |
4131 (Jun) |
2713 (Dec) |
| 1997 |
4605 (Aug) |
3097 (Jan) |
| 1998 |
4322 (Apr) |
2742 (Nov) |
| 1999 |
5151 (Oct) |
3042 (Jan) |
| 2000 |
6151 (Feb) |
3593 (Oct) |
| 2001 |
4462 (Feb) |
2600 (Sep) |
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| This is given as on 5th November, 2001. |
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| 13. |
What are the various types of Growth Funds? |
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Balanced Funds: Ideal for investors preferring moderate capital appreciation and income regularly |
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Diversified funds: Ideal for the investors seeking appreciation over medium to long term. Investments in equities across various industries / sectors either large cap or small cap |
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Index funds: Ideal for the investors who wishes to and also satisfied with returns equal to that of index |
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Sector specific fund: Ideal for investors who wish to invest in a particular segment or sector |
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| 14. |
How to measure the performance of a fund? |
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From the investor point of view to see the returns over a period of 3 months, 6 months, and 12 months etc.
Compare the peer group in the category and benchmark the return.
Look at the risk -return relationship.
Analyze the long- term performance to understand the consistency of performance in bull and bear markets.
The performance of a fund can be measured by quantitative tools like Sharpe and Treynor ratios. |
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| 15. |
Is it safe to invest in Mutual Funds? |
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Risk can only be minimised by professional management of fund. RISK CANNOT BE ELIMINATED. In the long run the fund will always gain. |
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| 16. |
Whether mutual funds can assure returns? |
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No. There are no assured returns in Mutual funds. The returns can be higher over a long period. In case any mutual fund wants to assure returns they can do so, by clearly expressing the safety net / safety cushion available equivalent to the amount assured and the source in place. |
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| 17. |
What is a Systematic Investment Plan? |
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Systematic Investment Plan is a method of investing into the fund of investor’s choice at regular intervals over defined time frame. This helps the investor to invest monthly, quarterly etc.
Since the amount is invested regularly and it is constant, the investor is able to get more number of units in the falling market and fewer unit when the price is high.
This helps the investor to smoothen out the market fluctuations and the investment will be at a low cost over a period. This strategy in investing is called "Rupee Cost Averaging". |
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| 18. |
What is systematic withdrawal plan? |
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Just like the above, withdrawal of funds in a regular interval; benefit in the rising market to reap the benefit out of average increase in the earnings. |
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| 19. |
What are all the schemes available from Canbank Mutual Fund ? |
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Growth Schemes: Canexpo, Canindex, CanEmerging Equities, Caninfrastructure, Canmulticap. |
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Income Schemes: Canshort Term Plan, CanIncome, Canbalance II, CanFortune 94, Cancigo, CanFixed Maturity Plan Series. |
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Gilt Scheme: Cangilt (PGS) |
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Liquid Scheme: Canliquid, CanFloating Rate |
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Tax saving scheme: CanEquity Tax saver |
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| 20. |
Why there is no assurance from Mutual Fund? |
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As per SEBI Guidelines; and also, the reason that any investment has certain amount of risk like; Market volatility in case of investment in Equities, Credit risk / interest risks in case of debt funds etc. However in the medium to long run there is always growth in the Mutual Fund schemes due to their wide and varied portfolio. |
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| 21. |
What are the services available? |
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Mutual Funds cannot give personal portfolio advise to investors. It is only through the investment in the schemes of mutual funds an investor can benefit. However the investors are given the information about the fund, portfolio details, about the market conditions, etc. whenever they contact our offices personally.
Mutual Funds have been permitted by SEBI recently to do Portfolio Management Services for which the guidelines are yet to be published.
In general Mutual Funds are better alternative for bank deposits to the investors who can invest their money for a long term growth as well as short term like money market instruments. The investments are generally safe as the portfolio consists of wide varieties of stocks comprising various industries, the growth being different among different sectors. The investor should normally follow up the growth in the NAV, industry etc. They can contact any of our Investor Relation Centers to have proper information in this regard. |
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| 22. |
Why should I look into Canbank Mutual Fund for investment? |
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Canbank is the pioneer in Mutual Fund Industry, started way back in the year 1988.
Sponsored by Canara Bank, one of the giants in the Indian Banking scene Canbank is having a track record of launching 20 different schemes in the past 14 years .Having a large investor base of around 4 lakhs spread all over the country. Professional managers with a rich experience and expertise built up over the years with strong investment management skills Wide network of 16 Investor relation centers providing the high quality customer service. Offering you wide range of schemes both Equity oriented and Debt oriented to suit your risk appetite. |
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| 23. |
What are the services offered by the Investor Relation Centers? |
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Presentation of various schemes |
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Regular communication on schemes |
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Update information services |
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Repurchase / Redemption services |
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Investment Relationship |
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Feedback on customer queries |
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Handling investor grievances, if any. |
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