What are Mutual Funds? How does it work?
A Mutual Fund is a trust that pools the money of a number of investors who share the same financial goals. The money collected by the fund management company is invested in a combination of investments such as Equities' Bonds and money markets, depending upon the investment objective. The income earned through these investments and the capital appreciation realized by the scheme is shared by its unit holders in proportion to the number of units owned by them.

What are Equity, Hybrid and Debt Funds?
Equity, Hybrid and Debt are three different types of investments.

Equity funds invests mainly in the Stock market. Each fund states its investment objective and invests the money pooled by the investors in stocks of companies that meet the stated objective. For e.g.- Sundaram Capex Opportunities Fund invests in companies that benefit from the infrastructure development and capital expenditure that is taking place in the Indian economy. So majority of the assets will be invested in companies that benefit from the above-mentioned objectives.

The advantages of owning Equity funds is that they give substantially higher returns for your money compared to other investment options.

The disadvantage is that these high returns come with a certain amount of risk and there is a chance that you may lose the invested money.

Debt funds invest in long term or short term papers that are issued by companies, banks or the government. These papers can be redeemed on a particular date at a pre-determined rate of interest. Once again, each debt funds invests the investors money as per the stated investment objective.

The advantage of Debt is that it is a less riskier option compared to equity schemes, though there is no guarantee of the returns.

The disadvantages are low returns compared to equity funds and returns are subject to interest rate fluctuations.

Hybrid Funds are funds that are a Combination of Equities and Debt funds. An equity-oriented hybrid fund must invest atleast 60% assets in equity funds. The same logic applies to a debt-oriented hybrid funds, with atleast 60% assets lying in debt schemes.

These schemes are suitable for first-time investors who would like to get a feel of both asset classes.

What are Open-end and Close-end Schemes?
Open-end schemes allow investors to transact (buy, sell, switch) on any business day.

Close-end schemes do not allow investors to transact on any business day. They specify a time horizon for which they will remain close-end post which they can either be converted to open-end or the scheme ceases its operations after redeeming all unit-holders.

How can I track a Fund's performance?
A Fund's performance can be tracked by the Net Asset Value of the Company. NAVs of a Fund are calculated on a day-to-day basis. A funds performance can either be measured against its benchmark, which is a stock market index such as Sensex, Nifty, BSE 200 etc, or against schemes from other fund houses which have a similar investment objective.

Every scheme must have a benchmark, as per the regulations. A fund house will select a benchmark which has a similar composition compared to the scheme.

What is Growth, Dividend Pay-out and Reinvestment? How do I choose between them?
Growth, Dividend Pay-out and Dividend Re-investment are the methods by which you can get paid the returns. The fundamental difference between the three options is the method in which the returns are distributed to the investor. Rest of the factors remaining the same, investors in these three options would get their returns distributed differently.

*	If you invest in the Growth / Appreciation option, the returns that your investment earns would continue to work for you in the market. It would reflect as appreciation in the fund's Net Asset Value (NAV)
*	If you choose to invest in dividend payout option, the returns generated by your investment are disbursed on a regular basis as dividends.
*	If your investment is in the dividend reinvestment option, then it means that you have authorized the fund house to reinvest the dividends declared by the fund house to buy more units. In terms of returns, dividend reinvestment is similar to that of the growth option.

To choose between them consider these factors:

a)	If your investments and liquidity are not linked (i.e. your investment does not hamper your regular cash flow), the best option would be growth / appreciation.
b)	If you are keen on receiving regular income from time-to-time, then you should opt for the dividend option.
c)	If tax efficiency is the key parameter in your decision process, then Dividend reinvestment may turn out to be the best. Should there be a need for liquidity; one can always sell units worth the required amount at NAV.

What is Net Asset Value?
The Net Asset Value of a Fund is calculated as the value of the fund's assets minus its liabilities. The performance of a particular scheme of a mutual fund is measured by its Net Asset Value (NAV).

NAV = {[Market Value of schemes investments + Cash/current assets + Income earned on investments] - [Amount payable on unpaid assets + Expenses accrued]} / Number of outstanding units of the scheme.

Why have so many Mutual Funds? Which is the best for me?
Every Mutual Fund is built with a particular objective and to cater to different group of people. People wanting lower risks may opt for Debt Funds. Those who want moderate returns for a moderate level of risks may opt for Hybrid Funds. People who look for Capital appreciation and are willing to take high risks for excellent returns may opt for Equity Funds.

Every scheme is built with a different objective.

what happens here?

Why should I invest in Mutual Funds?
Ask yourself one question. Where do you want to be 20 years from now? Your needs will grow, so will your lifestyle. Will you be able to sustain the same lifestyle or fulfill your dreams 20 years from now, with more or less the same amount for disposal that you have now?

You might argue that your salary will increase. Well, so will the cost of living. You might say 'You are saving'. But your needs will grow.

What about your life after retirement?
Will you have the power to do everything you wanted to do?
Will you be able to buy that house?
Will you able to afford your Children's education?
Fulfill their wishes?
The answer is no. That's why one needs more in life. More than your savings and your salary. Let your money grow in the right pace, an investment apart from your money saved in Bank accounts is essential for everyone who dreams of a comfortable tomorrow.

Consider this, Rs 10,000 in your bank account may get you an interest of Rs 300 making it to
Rs 10,300/- by the end of the year.

The same money put in the right mutual Fund may even double! The following table highlights the performance of Sundaram Growth Fund. This fund is suitable for first-time investors as its portfolio comprises large-cap, known companies and the fund mostly tracks the benchmark (BSE 200). Investors can expect a few percentage points above broad market returns.

Please use the latest Growth fund performance table

That's why Mutual Fund investments are important as they give excellent returns for your money.

What about Investment securities? Isn't Mutual Fund risky? It is investing the money in share market and I could lose all my money!
Mutual Funds don't put all the money in one single company, but maintain a diversified portfolio. Some funds have a portfolio of more than 100 companies! Say when you buy 10 different mangoes; chances are that one or two maybe bad. But you still can enjoy the rest.

It's the same with Mutual Funds. Keeping such a large number of shares means dividing your money in all these companies and all of them failing together is unlikely. So even though your money is subjected to market risks, the risk is divided by investing in a large number of companies.

If Mutual Fund scheme is closed, what happens to the money invested?
In case of winding up of a scheme, the mutual funds pays a sum based on current NAV after adjustment of expenses. You will also receive a detailed report on the closing of the Fund.

How much will my money grow? Is there a risk of losing all my money?
There is no assurance that the Mutual Fund will deliver what it promises, since there are many factors involved. In most of the investments your money does multiply, better than most traditional investment methods.

A mutual fund maintains a very diversified portfolio and invests in many sectors, such as in Engineering, Services, Consumer Goods, Financial services, IT, etc. For a Mutual Fund to fail, all these sectors have to entirely fail, together, which is unlikely.

Even if such a worst-case scenario, such a thing happens, with our booming economy, it will bounce back, with time. If a fund delivers good results it can change your future.

What are the risks I'm exposed to?
All type of investments involves some type of risks. The risks are

Market Risk
The value of a share of a company may rise or fall. There are various factors involved in the rise and fall. By diversification you are reducing the risk. If one company fails to perform, the other companies generally pick up. The best way to beat market risk is to make the investment diversified and to give the invested money some time to grow. A Mutual Fund does just that.

Credit Risk
This is the risk that comes in Debt Funds. There are risks that the company may fail and be unable to give back the promised amount.

Interest Rate Risk
In general, as interest rates rise, the price of a fixed rate bond will fall, and vice versa. Normally, longer the maturity of the bond, higher the interest rate risk.

Changes in the Government Policy
Changes in Government policy with regard to the taxes May affect the business scenario of the companies. This in turn will be reflected in the Companies share value.

Change in company's management
A change in company's policies may affect the company's share value. That's why Sundaram Asset Management Company firmly believes in staying in touch with the management of the company. Its fund managers stay in touch with the companies once a quarter either through direct visits or phone calls with key people within the company.

When should I start investing?
Anytime is a good time to enter the market, if investors are looking at a 5 to 10 year perspective. The earlier you invest and the longer you stay, more are your chances of earning good returns.

How do I choose my Fund?
Your choice of the Fund depends on the following factors -

1)	Your age- There is a general saying that equity investments as a proportion of your total investible surplus should be 100 - your age. So, if you are in the younger age group, you can invest high percentage of your assets in equity. If you are in the older age group, then high risks assets should be minimized.
2)	Your appetite for risks-If you are willing to take risks, then going for Equities may be the best option and they may give excellent returns for your money.
3)	The people dependent on you- If you have more number of people dependent on you, avoid Funds involving very high-risks. You may opt for the lower-risk Equity funds, Hybrid and Debt Funds.
4)	Your salary- It is not advisable to invest all your money in one single fund. A diversified portfolio would help you in the long run. If the salary is low, it is better to avoid funds that have considerable risk.
5)	How frequently do you require the pay-outs- Equities may pay once a year, or whenever profit booking is done. I you need regular pay-outs, then avoid investing in equities.

To choose the Best Funds it is best that you meet a Financial expert, who may pick the Best Funds for you and plan an Investment strategy for you. You can take an instant test here. click here
Overall the biggest operating factor is your appetite for risk

Funds that involve high risk, generally give good returns. Yet a Mutual Fund failing completely occurs in rare cases. With modern strategies and the boom in the economy it is rare and the Mutual Fund can always bounce back over a period of time, enough to give you back the invested amount.

If you are open to high risk, then equities is the best option for you. If you are willing to take moderate risks then 'Balanced Fund' is the best option for you. If you want to play safe then choose Debt Funds. However, they still suffer from the risks of Interest rates and possibility that the Company may fail to deliver.

What is the time-period for which I invest?
The longer, the better. Mutual Funds usually take a time-span of 2-3 years to deliver good returns. So give the Fund some time to make your money multiply.

What is SIP?
SIP or Systematic Investment Plan is a method of investing in Mutual Funds, by which you can put in small quantity of money, every month or once in a quarter. SIP is good if you don't want to give away a bulk of your money in one go. SIP enables you to start investing early and is a boon for salaried individuals.

To learn more about SIP click here

Shall I go for Systematic Investment Plan or shall I invest my money in bulk?
It depends on your needs as each has its pros and cons. Talking of returns, the bulk investor makes more money than a SIP investor. However during 'worst case scenarios' as well, the bulk investor may have to take a beating. During long-term investments, the Bulk investors make more money than SIP investor.

However SIP are better off than bulk investors when the markets fail very badly.

SIP is ideal for salaried individuals and people who want to start investing systematically.

What do I have to do to invest in Mutual Funds?
Just pick your Fund and fill the form! Choose the Fund you feel fulfills your needs the best and put in the amount you desire to put in.

From then on, just sit back and relax as the Fund Managers and people at Sundaram Asset Management Company do the hard work for you. We research the Companies, invest in them, buy or sell the shares, depending on the market response.

As soon as the money grows to a significant amount, it will be given back to you, depending on the mode you choose.

It's that simple!

How much will I be taxed for the dividends I earn from Mutual Funds?
Guess what? You have to pay NOTHING! After the Union Government Budget on 1999 it was decided that you would not be taxed for the Income you receive by investing in Mutual Funds.

However for Hybrid Funds and Debt Funds, you have to pay a Distribution Tax. You don't have to pay any tax for Equity Funds.