Aditya Birla Sun Life Mutual Fund

Fund Categorization: Categorization of Mutual Fund Schemes - Aditya Birla Sun Life Mutual Fund

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Fund Categorization

Let's start with the basics of Mutual Funds

How does mutual fund work?

A mutual fund pools investors' money to make multiple types of investments across different asset classes like equity, debt, gold etc.

The money collected in mutual funds is invested by professional fund managers in line with the scheme’s stated objective. In return, the fund house charges a small fee which is deducted from the investment.

The income / gain generated from this collective investment is distributed proportionately amongst the investors after deducting applicable expenses and levies.

Benefits of Mutual Funds

  • Easy Access: Mutual Funds can be purchased and redeemed easily. One can begin investing with as less as Rs. 1000 per month in mutual funds via Systematic Investment Plan.
  • Diversification: To diversify means to spread market risks by holding a variety of securities, rather than just a few. For example, if an investor buys just a few stocks and those stocks see significant declines in price over a short period of time, the investor's portfolio can drop dramatically in value. But if the investor buys a mutual fund that holds 50+ stocks, and a few of those stocks see price declines, the impact on the investor's account value would be less.
  • Economies of Scale: With mutual funds, because of the size of the pooled investors’ monies, the funds are able to take advantage of their buying and selling size and thereby reduce transaction costs for investors.
  • Professional Management: One of the primary reasons investing in mutual funds is easy, is because they're professionally managed. Rather than researching, analyzing, buying and selling stocks or bonds yourself, you have a skilled money manager doing it for you.
  • Individual Goals: Mutual funds help achieve individual goals. You could be looking at long-term wealth creation, or a place to park funds in the short term, invest in a dream home or plan retirement. There is something for every kind of investor - short and long-term goals, all wallet sizes and all age groups.

How to Invest in Mutual Fund

The beauty of investing in a mutual fund lies in the fact that they are designed to serve various purposes for investors termed as ‘Goals’. On top of that, investors are further able to opt in for solutions that factor in their age, risk taking ability, asset allocation and time horizon. (Read below 7 Steps to investing in Mutual Funds)

Whether investors are looking to park idle cash in the near term, or create a retirement corpus or simply want the benefit of saving tax while earning reasonable returns, mutual funds can cater to every financial goal.

At Aditya Birla Sun Life Mutual Fund we have defined the investor’s goals as per the following solutions:

  • Wealth

    Wealth Solution

    Wealth Solution

    These schemes seek to provide tax efficient return on your capital through equity...

  • Saving

    Saving Solution

    Saving Solution

    These schemes are aimed at preserving your money, providing you with...

  • Income

    Income Solution

    Income Solution

    These schemes seek to invest your money to provide regular income and...

  • Tax

    Tax Solution

    Tax Solution

    It provides tax benefits under section 80C and reduce your tax burden...

Choosing the right type of fund is the next step in achieving your financial goals. The nature of securities held by a mutual fund to generate returns, determines its category and what kind of goals it is most suited to fulfil. Different categories of mutual funds come with varying risk levels, lock-in periods & payment methods. So it is imperative to find out which category of mutual fund will suit your need.

7 Steps To Keep in Mind before Investing with Mutual Funds

  • 1 Identify Your Goals & Quantify them

    When you go shopping, do you have a list of things in mind? You don’t go buying things randomly without need or purpose. Right? Similarly, it’s important to know for what purpose you wish to invest. In simple terms, define and prioritise your investing goals. Also, it’s equally important to quantify these goals i.e. how much amount you would need to achieve your goals. For example, for buying a car you may need 4-5lacs or you may want a monthly income of Rs.50,000 for your post retirement days.

  • 2 Map yourself a goal achievement time horizon

    Once you have identified and prioritised your goals, calculate the years or the time horizon required to achieve your goals. This will not only help you identify the amount you need to save every month to achieve your goals but also help in deciding the type of mutual fund you should choose to do your investments. A debt fund could be ideal for your near term goals and an equity fund could be apt for your long term goals.

  • 3 Do not forget to account for inflation

    Each of our goals becomes expensive with each passing year. It is important to determine the future cost of your goal by taking a realistic inflation rate into account as inflation eats into our savings every day. For example, if your child’s higher education costs Rs. 10 lacs in today’s terms and this goal is still 10years away then the future cost of your child’s higher education would be Rs.21.58 lacs assuming 8% annual inflation rate.

  • 4 Understand your risk appetite

    Every person has a different capacity to take risk hence the scheme you choose should also match your risk tolerance level. You can invest in equities if you can tolerate significant erosion in your investments in short term otherwise hybrid or debt funds with relatively less risk should be chosen. Factors like your age, income, expenses and nearness to goals also help determine your risk appetite. For example, a young investor planning for his retirement could invest in equity funds but should start shifting his money to debt funds once he approaches his retirement.

  • 5 Select your scheme and mode of investment

    There are various mutual fund schemes available to cater to different needs of an investor. Based on your investment goal, time horizon and risk appetite you should choose the mutual fund scheme which best suits your profile. Prepare list of shortlisted schemes and options (growth or dividend) they offer. Also, ascertain the strategy you have to follow for example start a SIP in case of regular monthly investments or opt for STP in case lump sum amount needs to be invested in equity funds.

  • 6 Do your research online or hire a mutual fund advisor

    If you have enough time and expertise to understand the different types of mutual fund schemes available then you can do your own research and select the fund which will best suit your needs. There is plethora of easy to understand information available online for you. Or you could also take help of a mutual fund advisor. He will not only answer your queries about investments but also work with you to select the right mutual fund for you basis your individual profile.

  • 7 Finally have a diversified portfolio as per your profile

    It is important to be aware that all asset classes –equity, debt, gold etc do not move in the same direction at the same time hence it becomes crucial for you to diversify your investments across various asset classes. Time horizon and your risk appetite should be considered while deciding how much of your money should be in a particular asset. For a very short term goal, a liquid fund could be chosen whereas if you are a conservative investor with a long term goal, then you should invest in a mix of debt and equity i.e. a hybrid fund. Always remember not to put all your eggs in the same basket.

Each of these categories are further divided into clearly defined sub categories with an aim to help you select the right scheme to suit your investment goals, risk appetite and investment horizon.

Way to Invest in Mutual Funds

  • Directly with the AMC: You can invest in a mutual fund scheme by investing directly through their branch offices or their official websites.

Aditya Birla Sun Life Mutual Fund offers to the customers a set of Value Added Products and Services (applicable basis product)

Facilities
Description
SIP
Systematic Investment Plan - Available Online & Offline for Direct & Regular investors to iron out intermittent market volatility and enable long term savings
CSIP
Century SIP - SIP to enable your long term wealth creation while providing Free Life Insurance of upto Rs 50 Lacs
STP
Systematic Transfer Plan (STP) allows investors to save in both asset classes by transfering a fixed amount from one scheme and invest in another scheme
SWP
Systematic Withdarwal Plan allows investors to withdraw a fixed amount of money from their mutual fund to build sustainable income streams while saving on Tax also
SWF
"Smart Withdrawal Facility offers fixed payment option & variable payment option to allow investor to receive income @@8% p.a. at fixed intervals or equivalent to dividend payment in the fund respectively. This helps in building regular cash flows, Tax efficiency, No TDS, No exit load impact. Available in BAF, Bal '95, BDYP, MIP 25, MTP, CBF, DBF, STOP"
CATP
Capital Appreciation Transfer Plan (CATP) allows investors to preserve their capital and transfer only capital appreciation to another asset class / scheme at regular intervals
SPPF
Smart Premium Payment Facility (SPPF) allows common customers of ABSLI and ABSLAMC to provide long term savings (comparable to FD rates) while allowing their insurance premium in BSLI to be paid directly out of this corpus without any associated cost. The eligible scheme for availing this facility is ABSL Cash Manager Fund

Things to keep in mind before investing

It is important to identify your goals before investing for them. Once you have your goals, determine the kind of investor you are. If you are easily unnerved by stock market ups and downs, it won't do any good to take on a large equity exposure. But if you can stomach risks, an equity fund can help you reach your financial goal faster.

Choosing the right type of fund is the next step in achieving your financial goals. The choice should be defined by the tenure of the investment, your willingness to take risks, and the liquidity offered by the option. A debt fund, for instance, won't be a good way to save for retirement when you are in your 30s. An equity fund, on the other hand, won't help if you want to save to buy a car next year.

Scheme Re-categorization – FAQs
  • What is the benefit of the New Categorisation?

    It will provide Mutual Fund houses clarity and comfort to follow a set of guidelines in identifying investment opportunities.

  • How does this benefit the investor?

    It will help investors identify schemes that suit their investment goals, time horizon and risk profiles. It is also expected to make various funds comparison across industry easier. It will help investors making an informed investment choice.

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Mutual fund investments are subject to market risks, read all scheme related documents carefully.

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