@prateek I wonder if you have tried any of the modern platforms like Orowealth, Zerodha coin etc.
Also, does mycams support all the funds ? The funds by Karvy, Franklin and Sundaram as well because the RTA of those funds is not CAMS ?
A lot of direct mutual fund platforms are popping up clearfunds, groww, upwardly, unovest, kuvera, BharosaClub, moneyfront, orowealth, wealthpedia, jama to name a few. These are supposed to provide a better interface, usability and customer support as compared to Govt instis/RTAs
There are Govt institutes or other approved bodies(KRAs/MF own investing platform) as well that let you invest in direct funds like MFUtility, CAMS, Karvy. The choice of mutual funds in CAMS/karvy is restricted to mutual funds that these people serve(CAMS seem to let you invest in the karvy funds as well though).
MFs own investing platforms are restricted to their own funds. e.g on SBI transaction platform you can invest only in SBI funds.
Then there are bigger brokers like Zerodha Coin coming as well to fray.
So you have quite a few choices in how to invest in direct mutual funds. I personally doubt the business model of direct fund only platforms so I personally invest with zerodha coin as they seem to have a better business model and business can stay long. Please note that if the business closes, you will need to shift your funds to the other platform which can be cumbersome.
Just my thoughts, please do your own research before investing.
Index funds are the type of mutual funds which invests in stocks of a market index. The composition of the portfolio is exactly the replica of an index in term of weight age and stocks. Hence, the return from index funds will be in the same line of the index. In this post, we look at various options on how to invest in Index Funds in India.
Features of Index Funds
Analysis of Index Funds
Analysis of index funds doesn't require deep digging of the fund's performance or portfolio composition. But there are few factors which affect the performance of the fund that should be looked upon for determination of the future performance of fund following points should be checked.
How to invest in Index Funds
There are multiple ways, an investor can opt for investing in Index Funds
Online Portals: With the advent of Robo-advisors, investment in mutual funds are more efficient and focussed towards achieving financial goals more effectively. It uses set of algorithms, data analysis in suggesting the right fund to investors. Some pros and cons of Online portals are:
Low fees with high-quality investment service
Covers broader area of investment service
Ease of use with interactive platform
These are Independent financial advisor (IFA), helps an investor with managing financial goals, investment needs, recommends mutual funds and finally helps to buy them. Investing through IFA is ideal for investors who don't have knowledge of financial planning. Some pros and cons of IFA are:
One can invest in mutual funds through the Demat account also. Your online portal or an agent can open an demat account as well for your investments. Some pros and cons are:
One can invest in their pre-selected funds through official website of Asset management company. Pros and cons of investing directly through AMC are:
What is c KYC?
cKYC is known as Central KYC, is a centralized registry for maintaining the KYC records of an individual digitally. The cKYC registry was launched July 2016, with an aim to reduce the level of documentation and KYC verification process involved in a financial transaction with different financial institutions including Banks, Insurance, NBFCs and Mutual Funds.
The cKYC eliminates the need for individuals to comply with KYC process with different financial institutions. The data stored in the central registry can be accessed by different financial institutions for the verification process on advance payment of fees to the CERSAI. CERSAI is the implementing agency of cKYC programme.
The cKYC process also includes the provision of Foreign Account Tax Compliance Act (FATCA) which enables the Indian Tax authorities to receive information from financial institutions. The whole KYC process is framed to prevent the money laundering through the system and bringing more people under the Tax net.
Benefits of cKYC
How to check status online
To check the cKYC status of an individual online, one needs to visit the Karvy website and check the status with providing the PAN no. in the required field. The site will only provide the details on cKYC status whether he/she is registered or not and date of registration with the KRA.
The more comprehensive details of the individuals are provided to the financial institutions on their system on payment of fees.
Types of c-KYC
There are three types of accounts classified in cKYC:
Simplified or Low-risk account: Under this category, the account type is marked as "L" which means low-risk individual and are not able to provide the address proof in any of the 6 official documents which include Aadhar card, Voter ID, Passport, PAN, Driving License or Job card issued by MNREGA. They are given the option of submitting the proof through utility bills, not more than 2 months old( telephone, electricity bills), property tax receipts; saving bank account or post office savings account statements.
Small account: This account is marked as "S" and will apply to those individuals who don't possess any of the KYC documents. This account can be opened by providing an application with a self-attested photograph and thumb impression on it in the presence of the bank official. The account will be valid for 12 months and after will be extended after verifying that they have applied for the normal KYC. During this time the individual will have access to limited financial access from banks.
Normal Account: Those individuals who can establish their identity and submit proof of address in the 6 official documents including AADHAAR, Voter ID, Passport, PAN card Driving license, MNREGA Job Card falls under the category of Normal Account.
About the implementing Agency CERSAI
Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI) is the implementing agency for the KYC programme of the government. In this institute, the Govt. of India holds 51 percent share and rest with different public sector banks and National Housing Bank.
The objective of the company is to maintain and operate registration system in India under various Acts of the govt. and looked upon as a risk mitigation tool for financial institutes operating within the country to prevent multiple financing against the same property.
How to complete cKYC Registration process
One can complete registration process of cKYC by filling the form and submit the same with supporting documents to your Bank, financial advisor, Mutual fund office or with a KRA.
In cKYC form, it has few additional column for Mother's name, Residential Status and Occupational details which are not present in other KYC forms
There is an additional column for Details of Related Person. The information is provided under certain circumstances like Guardian of Minor, Assignee (for Life insurance policy) and Authorized Representative ( NRI has to appoint a representative who will act on his/her behalf). If you don't fall under this category, then skip and move to another column.
You can always take assistance from your financial adviser/entity to complete the form if you face difficulty in furnishing any documents or information.
After successful completion of the cKYC process, you will be allocated 14 digit Identification no. for future reference which will be sent to your registered SMS and email id and no physical mail will be sent. And, if your application gets rejected same will also not be intimated to you but you can approach your KRA for the same.
If in the case, there is any update request by the customer for change in the information provided, then the financial institution will initiate the process of change in the information of the customer as existing in the records of Central KYC Registry.
cKYC is a very progressive initiative by Government and RBI in the direction to make a single registry for verification, where all the data can be stored digitally and can be accessed by large no. of financial entities without the fear of getting tampered or unverified data. In long term, it will help the country to build more transparent and strong financial institutions. And, for customers, it will result in less paper work, faster approval and reduced time to complete the transactions.
FAQs on cKYC
Do I need to have cKYC, if I have already registered in the eKYC process?
eKYC is a biometrically based registration process which is used only for online transaction and cannot be used for physical transaction and transactions involving higher amount. It is necessary to complete the cKYC process if you are in cKYC.
I have registered in KYC process earlier, Do I need to do again for the cKYC?
No, your electronic copy of KYC data will be transferred automatically to the cKYC registry
Do, I need to pay fees for the process?
No. you don't need to pay anything for the process. The system is maintained by the stakeholders who have access to the data of the registry.
Is there any different template for the Individual and Legal entity?
Yes, there are two different templates. One for individual and other for legal (Non-individual)
Public Provident Fund Scheme is a saving scheme that comes with tax benefits. Ministry of Finance introduced this scheme in the year 1968. The main objective of PPF is to encourage general people to mobilize their small savings. The interest offered on these schemes are not taxable. Precisely, PPF is an investment with non-taxable returns.
What Is Public Provident Fund (PPF) Account?
General public has to open Public Provident Fund accounts to use PPF schemes. These accounts get opened for fixed period. The account holders will earn interest on their savings. Unlike traditional FDs, the return rates are not fixed. The Government announced PPF interest of 8.7% for the fiscal year 2015 - 2016.
This scheme was introduced for low-income classes. So, that more people would save in the shape of investment with non-taxable returns. This is why the minimum deposit limits are very low as compared to other investment schemes. Exemption from a tax is the main attraction of PPF accounts. Secondly, people can access them easily. Government back these accounts so that account holders will feel safe about their investment. PPF accounts are simple to open and use, thus making them most popular saving schemes among low-income classes of India.
Anyone can open PFF account at nationalized & authorized banks as well as post offices. In fact, some authorized private banks can offer this scheme. People have to submit account forms with required document and minimum deposits to open an account.
As said earlier, interest rates are not fixed. The government of India has the power to change the interest rates. Maximum deposit limit has been specified. This limit is subject to change as per the government.
Regardless of submission date, the deposit year for every PFF account is April 1st - March 31st.
Salient Features Of PPF Scheme
The key features of Public Provident Fund Scheme are stated as below:
Variable Interest Rate:
PPF schemes are not like fixed deposits. So, the interest rate gets changed on the regular term by Indian Government. The interest for every PPF scheme is compounded annually.
The deposit will be locked in for straight 15 years. You can withdraw the money after completion of the maturity period. Well, You can make the pre-mature withdrawal. But it is possible only after the end of the sixth financial year. After maturity period, you can have amount plus interest without paying any tax!
The minimum deposit of Rs. 100 is required to open PPF account.
To make the account active, you have to make deposits for 15 years annually. Otherwise, the account will be considered as inactive.
Deposits can be made by cash, online funds transfer, cheque, DD, PO, lump-sum or 12 installments, etc.
Precisely, you can make the withdrawal of money with compounded interest after maturity period of 15 years. But there is an option of partial withdrawal after the end of the 6th financial year. This pre-mature withdrawal is subject to certain conditions.
The interest is non-taxable. But deposits are taxable under S 80C of Income Tax Act. While no wealth tax is applicable for withdrawals.
PFF account allows nomination at the time of opening or later.
Transfer Of Funds:
You cannot transfer funds to other people. But you can make transfers between different bank branches or post offices.
PFF accounts can be used to avail loans with the tenure of 3 - 6 years.
You can renew the account for an extra 5 years once a time.
PPF accounts are not joint accounts.
Why Should You Invest In PPF Scheme?
Here are the reasons why PPF Scheme is a popular investment avenue:
Appealing Long-term Investment: Deposits are made for 15 years in PPF schemes. There is a locked in period for 7 years. In this way, it is an attractive long-term investment with handsome prospects.
Beneficial For Retirement Plans: Retired people tend to look for tax-free investment with appealing interest rates. PPF is an ideal investment option for retirement planning.
Tax Benefits: No tax will be deducted from compounded interest and withdrawals. Although, deposits are subject to taxation.
Accessible: PPF schemes are offered by nationalised & authorised banks plus post offices. Both options are widely accessible in India. You can open the account online too!
Rules And Regulations Of Public Provident Fund Scheme
As we know, PPF scheme is run by Government of India. It means proper rules and regulations are associated with this scheme. In this section, you will learn important details about eligibility and documentation of PPF accounts. After reading this section, you can easily open and maintain PPF account on your own.
Eligibility For PPF Account
One PPF account is fixed for one person. Any Indian resident above the age of 18 years is eligible to open PPF account.
Minors can open PPF account. In this case, maximum deposit limit of 1.5 lakh per year is fixed for minor & guardian's account collectively. Grandparents are not allowed to open the account as per the names of minors.
Non-resident Indians are not allowed to open PPF account. However, if anyone leaves the country after opening PFF account and become NRI later, can maintain the account until maturity. But that person cannot renew the account.
Before 2005, HUFs were allowed to open a PPF account. The accounts had opened before 2005 were continue to operate until the maturity period. No one can initiate the account for any HUF. HUF means Hindu Undivided Family.
Foreigners are not allowed to open the account.
Public Provident Fund Account Documentation
Three types of documents are needed to open PPf account. Such as, Identity proof, address proof, and signature proof.
Following documents are required for PPF account:
Adhar Card, PAN card, Passport, Voter's ID, Driving License, Utility Bill, Rental/Lease Agreement, Ration Card, Bank Statement or Signed Cheque
Account Opening Form and nominee form in case of nomination
The banks may ask for further documents in special scenarios. For instance, age proof will be needed to open PPF for a minor.
How To Open Public Provident Fund Account?
You can open PPF account via following channels:
Bank / Post Office: In order to open PPF account, you should visit any bank or post office nearby, who is authorised for PPF scheme. There you can get required forms for opening of account. Fill the form and submit with essential documents. An initial investment is mandatory for opening; that can be a minimum of Rs. 100.
Online: Some banks offer an option for the online opening of PPF account. you can visit their official website for further details. The online opening of account saves the time, traveling cost and effort. That is why this scheme is gaining popularity with time.
Types OF PPF Forms
For each purpose, there is a specific PPF form. They start from A to H. Please check the details about each one as below:
Form A (PPF Account Opening form)
As the name implies, this form is mandatory to open PPF account. The prime particulars of Form A include name, address, signature and PAN Card details. For minors, further information like names of minor & Guardian and their relationship will be needed. In case, the agent has opened the account, name of the agent is required.
Form B (Deposit or Loan Repay Form)
To make the deposit or repay the loan taken against PPF, Form B is needed. You may make the payment as penality to reactivate the account. Always remember, you have to make deposits annually. Otherwise, the account will be deemed as inactive. The account holder can receive the loan against PPF account for the period 3 - 6 years, starting from an opening year. The deposits can be made by cheque, cash, DD or internet banking. The medium has to be mentioned in Pay-in-slip. If an agent is making the deposits, the details of an agent are mandatory.
Form C (Partial Withdrawal Form)
To withdraw money before maturity, Form C is needed. This is an application to make the withdrawal of a certain amount after the end of a 6th financial year. You have to make the declaration in this form about no further withdrawals in the same year.
Form D (Loan Form)
A loan for 3 - 6 years can be availed against active PPF account. Form D is required for this purpose. Its key particulars include PPF account number, the amount of loan and promise to pay the amount within tenure with interest.
Form E (Nomination Form)
An account holder can make the nomination for more than one person. Form E is needed for this task. In this, you have to include details about nominees. For multiple nominations, you have to specify the percentage by which they can claim the amount. Nominations are not allowed for minor's account.
Form F (To Alter Nomination Information)
You can add or remove the nominee at any time. For this purpose, Form F is required.
From G (Claim Funds By Nominee/Legal Heir)
If account holder dies, the nominees or legal heirs can claim funds using Form G. Along with essential information; the death certificate is needed to be attached with this form.
Form H (Maturity Extension Form)
The standard maturity time for PPF account is 15 years. But an account holder can extend it for extra five years at a time. You need a Form H for maturity extension. The key information includes an account number and opening account date.
Public Provident Fund Deposit Limits
Initially, the person has to deposit at least Rs. 100 to open the account. While the minimum deposit per year is Rs. 500. To keep the account active, annual deposits are mandatory. Otherwise, the account holder will end up with the inactive account.
The maximum annual limit for deposit is Rs. 1.5 lakhs. You have the option to pay it as lump sum amount or 12 installments per year. You can even pay an amount as two installments per month. This scheme is that convenient!
How To Reactivate An Inactive PPF Account?
Annual deposits are essential to keep the account active. Otherwise, the account will be deemed inactive.
The account can be reactivated by paying the penalty plus minimum deposits for total inactive years. The penalty is Rs. 50 per inactive year. You should keep the PPF account active. Otherwise, loan and withdrawal won't longer be available!
How To Withdraw The Investment From PPF Account?
PPF account is opened for 15 years. It means the withdrawals are allowed after 15 years. You can withdraw entire amount with non-taxable interest once the maturity period is done.
But in the case of extreme urgency, there is an option to do partial withdrawal after the end of 6th year. The amount of partial withdrawal is equal to 50% of total amount residing in the account at the end of the fourth year or preceding year, whichever is lower!
Another important fact, you can make withdrawal once in a year.
Extension Of PPF Account Tenure
The 15 years maturity period is fixed for PPF accounts. However, you may extend the tenure for five years with or without addition of deposits:
After the maturity period, you can extend the tenure for five years without any additional investment. The interest will be compounded on the total amount present at the end of 15th year.
In case you have added deposits to extend the tenure, the interest will be accrued on total amount. But the withdrawal amount will be restricted to 60% of total amount in the start of extension!
What Are The Tax Benefits Of PPF Account?
Tax benefits are the actual attractions about PPF scheme. Basically, this scheme falls in tax category of EEE. EEE means (Exempt, Exempt, Exempt).
Deposits are taxable under S 80C of Income Tax.
Interest earned are non-taxable.
Withdrawals are not subject to wealth tax.
Frequently Asked Questions About Public Provident Fund Account
We have explained everything about PPF account. Still, there are some questions which are frequently asked about PPF. We have addressed few of them as below:
Can I open 2 or more PPF accounts in my name?
According to PPF scheme, a person can open and maintain only one account.
Can I reactivate my inactive account?
Yes, you can use inactive account by paying the penalty along with deposits for each missed year. The penalty of Rs. 50 per year will be charged if you are not making deposits!
Will I receive the interest for an inactive account?
No, you cannot earn interest, if the PPF account is inactive. You have to pay penalties plus missed deposits to reactivate the account.
Can I invest more than the Rs. 1.5 lakhs limit?
No, you cannot invest more than Rs. 1.5 lakh annually.
Can I open PPF account on behalf of my grandchild?
No, grandparents are not allowed to open a PPF account in the name of grandchildren.
Can I withdraw investment before 15 years?
Yes, you can make the partial withdrawal after the end of 6th year. This partial withdrawal is subject to certain legal terms and regulations.
Public Provident Fund is a perfect investment option for low-income classes. It comes with tax benefits that are no longer offered by any other investment scheme. Long term investment with non-taxable earnings make it an ideal option for retirement planning. Backed by Government and easy to access are the features that make PPF scheme so famous among general public!
Hopefully, this article was proved to be helpful. In a case of any query related to PPF, please comment below!
Post office department has been the pillar of small savings in India. With a total investment base of about 6 lac crores, they are one of the biggest deposit mobilizers in Indian banking sector. While traditionally Post office schemes enjoyed huge popularity due to round the corner presence , local trust and the fact that they offered slightly higher returns than similar schemes from banks but they have not at all kept pace with improvements in banking services and customer facilities. Here are 5 reasons why I do not recommend investing in post office schemes
Non-Core Banking Service
Most of the post offices are still not on Core banking platform as a result whatever investments or savings you park with them stay with the local branch. For any changes, pre-mature withdrawals etc you need to go the branch where you opened the account or made the investments
Non-Digitization of Documents
NSC ( national saving certificates or KVP ( Kisan visas patra) etc all these investment documents are given in the physical form. In the case of theft or damage or lost of the physical document, Its not very easy getting records updated and in general who keeps all these physical documents.
Reducing Interest rates advantage
One of the traditional advantages of Post office schemes was they enjoyed higher spread and hence interest rates were 50 bps to 100 bps more than similar products from banks that gap has come down now
Post office staff is not the most friendly staff you will encounter around certainly something which needs massive makeover
Competitive advantage of schemes no longer exists
In my parents time there were limited financial products and as a result, some of the post office schemes were very popular for example if you wanted to save taxes Kisan Vikas Patra or the NSC were most important schemes .Now there are many more options available in the market both on debt and equity side. Also with increased distribution power of banks, they are distributing mutual funds and lot of other products as a result post office schemes no longer remain very attractive.
This blog post will try to answer following questions
What are liquid funds :
Liquid funds are class of mutual funds which invest in Money market instruments like treasury bills, commercial paper, certificate of deposits, and term deposits most of these assets have 3 months to 13 months of maturity period which in turn gives fund manager flexibility to meet immediate redemption requests.
Why are they called liquid funds
Liquid name comes from the fact that withdrawals from these funds are processed within 24 hours hence its quite a liquid asset
Why should you invest in Liquid Funds
What are the various option in Liquid funds
Top liquid funds in India as per Crisil are as follow
Why Liquid funds are better than savings account
Liquid funds are better than savings account for following reasons
Tax implications of Liquid Funds
Liquid Funds versus Fixed Deposits
Liquid funds offer better liquidity then Fixed deposits, you can get your money in 24 hours and for some funds through ATM also.
There is no exit load for liquid funds but in case of an FD for premature withdrawal one has to pay a penalty
In last 2-3 years Liquid funds have outperformed FDs in terms of returns
With recent changes there are not much difference in how tax treatment of FDs and Liquid funds
Liquid Funds versus ultra short term Debt Funds
Liquid funds invest in securities with maturity upto 91 days, Ultra short term debt funds invest in securities with maturity upto 1 year
Liquid funds come with no exit load, some of the ultra short term debt funds come with an exit load
Due to nature of underlying securities volatility and risk is lower for liquid funds, as compared to short term debt funds
How to chose a liquid funds.
Key factors to look at while chosing a liquid fund are as follow
When should you invest in liquid funds
Liquid funds investments are best to park money which you require almost immediately, so my first suggestion will be that move all your cash holdings and savings account holding to liquid funds, you can also move part of FDs also to liquid funds, chose dividend re-investment option if you come under tax 30 % tax bracket.
Mutual funds for 80c benefits also called ELSS or tax saving funds are one of the most prominent and lucrative investment options to save taxes as well as grow money. Primarily because the have lowest lock-in period amongst the 80c investment options and have historically delivered best returns
Overview of 80C returns
A lot of people start sweating and running away by the name of income tax. If you are also one amongst those who think that income tax acquires a huge chunk of your total income and no portion of your income is left untouched, then 80C is a Section that you would want to lend your ear to.
Section 80C is one of the most commonly known section of income tax act. The investments like life and health insurance, mutual fund investment, provident fund, investment on pension schemes are covered under Section 80C. Basically an investment on any of this pre- stated instruments can fetch you up to Rs.1.5 lacs of tax exempted income. Furthermore, these exemptions are not limited to investments but are also extended to expenses like education fees and home loans.
Deductions under 80C
Life and health insurance, may it be for individual or family, the annual premium paid under this is eligible for tax exemption.
Apart from that home loan payment, fixed deposits, provident funds, pension funds and educational expenses and much more are entitled to tax exemption with certain terms and conditions under Section 80C.
Mutual funds for 80C benefit ( tax saving funds)
Section 80C is an overloaded affair, offering ample amount of instruments. The investor has to keep one’s financial planning in mind before investing under 80C. Most of the high earning officials who are included in 30% brackets of income tax are turning their attention towards mutual funds to reduce their tax liability.
There are certain mutual funds that come with a tax saving feature like ELSS. The investment in such mutual funds can avail tax benefits u/s 80C. Some of the most common ELSS are SBI magnum tax gain, Franklin India index tax fund etc.
A lot of experts advice to check the tenure of the instrument that you are interested in. The open ended equity mutual funds can be beneficial for short- term financial goals since the lock-in period is 3 years only but for long term goals, 15-year PPF or the NPS would be a correct choice.
Advantages of ELSS
People have been depending on PPF for way too long now and must think of putting their first step into equity market through ELSS.
Idyllic, one should spread over one’s investment in ELSS throughout 12 months, starting from the beginning of financial year. One of the best parts of ELSS is the flexibility that it provides.
Firstly the minimum investment is as low as Rs.500 plus you can make your contribution on any trading day of the year. Also, there is no compulsion to make a contribution every year.
Apart from the tax benefit, it also helps you to grow your money since it invests in equity related instruments; your money grows when the stock market grows. The returns that you procure are also tax-free, which makes it the only short period investment option that provides tax- free returns. No other instrument u/s 80C provides that.
Also, most of the investor’s getting attracted to withdraw their money as soon as they make some good returns; ELSS MF’s forces them to keep their money for a period of three years, which helps you to grow your money.
The expense ratio in the case of mutual funds sector refers to the measure of the amount costs by an investment company for operating a mutual fund. Experts may calculate mutual funds expense ratio based on an annual calculation by giving the complete funds operating expenses by an average of the rupee value of its AUM i.e. Assets Under Management. Few experts also call it MER i.e. Management Expense Ratio.
Function of Expense Ratio
The main role of this ratio is to exclude operating expenses present in the assets of a fund and at the same time, lower the return to investors in the fund. Expense ratio expresses the actual percentage of various assets, which undergo deduction in each fiscal year for available fund expenses, including management fees, 12b-1 fees, administration fees, operating costs and many other costs related to assets incurred from the available funding.
Calculation of Expense Ratio
Experts have calculated mutual funds expense ratio based on following two important categories, as mentioned here.
Annual Gross Expense Ratio
Annual gross expense ratio associated with mutual funds refers to the specific percentage of fund assets, which individuals pay for management fees, operating expenses, and interest expenses. Gross expense ratio includes following important types of fees-
Annual Net Expense Ratio
Annual Net Expense Ratio indicates the actual fund assets’ percentage paid for management fees and operating expenses. This ratio includes the following important fees,i.e. administrator, accounting, auditor, advisor, the board of directors, distribution in the form of 12b-1, custodial, organizational, legal, professional, shareholder reporting, on borrowed registration, transfer agency and sub-advisor.
The Main difference of net expense ratio with the gross one is that the net expense ratio includes fee waivers associated with the period and excludes dividends and borrowed securities. Expense ratio in this case does not highlight brokerage costsassociated with the fund and any kind of charge of investor sales. Experts call this as an Audited Expense Ratio and it pulls the annual ratio of net expense from the audited annual report associated with mutual funds. However, similar to the case of the gross expense ratio, in the case of an annual report about net expense ratio, it highlights actual fees charged for a specified fiscal year and prospectus type of expense only provides details about material variations cause of the expense structure of the current period.
In a way, there are a lot of similarities between Mutual Funds and Hedge Funds. In the both types of investments, a group of investors pool their money and invest in different type of securities. The main misconception about the funds is that people think that they are similar and the terms are interchangeable. In reality, they are not same and there is a very thin line between them. The main difference between these two funds is that in a Hedge fund the number of investors is very less while the Mutual fund has a large number of investors.
In simple words, a mutual fund can be considered an investment vehicle in which a group of people pools the money and a fund manager invests those funds in different securities. The manager often charges a fee for the administration of the fund, which depends on the size of the investment.
A hedge fund is an investment portfolio which is managed under investment partnership. These types of funds are a private portfolio of investments which uses highly advanced strategies for the investment and risk management.
The key differences between Mutual and Hedge funds
The investments in both funds depend basically on the recourses you own. If you have a lot of funds you can invest in hedge funds. In case you have limited resources, you can choose to invest in one or two mutual funds depending on what kind of returns you are looking for.