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Mutual Funds Interview Questions & Answers - Learning Mode

Mutual Funds Interview Questions & Answers - Learning Mode

A mutual fund is a pool of money from numerous investors who wish to save or make money just like you. Investing in a mutual fund can be a lot easier than buying and selling individual stocks and bonds on your own. Investors can sell their shares when they want. A mutual fund is an investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets. A mutual fund is a professionally managed investment fund that pools money from many investors to purchase securities.

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Subcategories for Mutual Funds Interview Questions & Answers - Learning Mode

Following are sub categories for which Interview Questions & Answers are available under Mutual Funds Interview Questions & Answers - Learning Mode. Please select the appropriate sub-category:-

Debt / Income Mutual Fund Interview Questions & Answers (3) Learning Mode | Exam Mode

Diversified / Balanced Mutual Fund Interview Questions & Answers (1) Learning Mode | Exam Mode

Equity / Growth Mutual Fund Interview Questions & Answers (1) Learning Mode | Exam Mode

Fund of Funds Interview Questions & Answers (1) Learning Mode | Exam Mode

Gilt Fund Interview Questions & Answers (2) Learning Mode | Exam Mode

Index Funds Interview Questions & Answers (1) Learning Mode | Exam Mode

Money Market / Liquid Mutual Fund Interview Questions & Answers (1) Learning Mode | Exam Mode

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Mutual Funds Interview Questions & Answers - Learning Mode
Try Mutual Funds Interview Questions & Answers - Exam Mode
Question: What are risks by investing funds in Mutual Funds?

Answer: Investments in stock market are risky as the value of our investments goes up or down with the change in prices of the stocks where we have invested. Therefore, the biggest risk for an investor in Mutual Funds is the market risk. However, different Schemes of Mutual Funds have different risk profile, for example, the Debt Schemes are far less risk than the equity funds. Similarly, Balance Funds are likely to be more risky than Debt Schemes, but less risky than the equity schemes. Source:
Question: Can non-resident Indians (NRIs) invest in mutual funds?

Answer: Yes, non-resident Indians can also invest in mutual funds. Necessary details in this respect are given in the offer documents of the schemes. Source:
Question: How significant are fund costs while choosing a scheme?

Answer: The cost of investing through a mutual fund is not insignificant and deserves due consideration, especially when it comes to fixed income funds. Management fees, annual expenses of the fund and sales loads can take away a significant portion of your returns. As a general rule, 1% towards management fees and 0.6% towards other annual expenses should be acceptable. Carefully examine the fee a fund charges for getting in and out of the fund. Again, you can query on entry and exit loads. Source:
Question: What are Offshore Funds?

Answer: Offshore funds specialise in investing in foreign companies or corporations. These funds have non-residential investors and are regulated by the provisions of the foreign countries where these are registered. These funds are regulated by RBI directives. Source:
Question: What is a Mutual Fund?

Answer: A Mutual fund is an investment instrument where a large number of investors pool in their finances in a single trust. This trust is managed by a team of financial experts (known as Asset Management Company) who invest the accumulated capital in different financial assets like stocks, bonds and equities etc. All the people who invest in this fund share a common investment goal and the dividends earned from the investment is distributed in proportion to the capital invested. Source:
Question: Is there an easy way to check taxation liability for mutual fund Sips?

Answer: Every unit of mutual fund comes with a date of allocation of the net asset value for that particular unit. For example if you have 60 installments or SIPs, you would have 60 unique blocks in the folio. Calculation of tax must be done by checking the one year or 12 month limit for each such block. If you sell the entire holding in the mutual fund, you will need to determine the number of units that were long term ones and the number of short term units. Source:
Question: What are common approaches to investing in mutual funds by their portfolio managers?

Answer: Common approaches to investing in mutual funds by their portfolio managers are:-
Top-down approach ? looks at the big economic picture, and then finds industries or countries that look like they are going to do well. Then invest in specific companies within the chosen industry or country.
Bottom-up approach ? focuses on selecting specific companies that are doing well, no matter what the prospects are for their industry or the economy.
A combination of top-down and bottom-up Source:
Question: If schemes in the same category of different mutual funds are available, should one choose a scheme with lower NAV?

Answer: Some of the investors have the tendency to prefer a scheme that is available at lower NAV compared to the one available at higher NAV. Sometimes, they prefer a new scheme which is issuing units at Rs. 10 whereas the existing schemes in the same category are available at much higher NAVs. Investors may please note that in case of mutual funds schemes, lower or higher NAVs of similar type schemes of different mutual funds have no relevance. On the other hand, investors should choose a scheme based Source:
Question: Do any mutual funds invest in both stocks and bonds?

Answer: Yes, balanced funds invest in a combination of stocks and bonds, a typical mix is 60:40 in favour of stocks. Returns from balanced funds are normally lower than pure equity mutual funds when markets are rising, however if the market declines, the losses are also normally lower. Balanced funds are best suited for investors who do not plan their asset allocation and yet want to invest in equities. Buying separate equity and income funds for your portfolio also achieves the same results as buying a Source:
Question: How are mutual funds regulated?

Answer: All Asset Management Companies (AMCs) are regulated by SEBI and/or the RBI (in case the AMC is promoted by a bank). In addition, every mutual fund has a board of directors that represents the unit holders interests in the mutual fund. Source:
Question: If mutual fund scheme is wound up, what happens to money invested?

Answer: In case of winding up of a scheme, the mutual funds pay a sum based on prevailing NAV after adjustment of expenses. Unit holders are entitled to receive a report on winding up from the mutual funds which gives all necessary details. Source:
Question: Do mutual funds offer a periodic investment plan?

Answer: Most private sector funds provide you the convenience of periodic purchase plans (through a Systematic Investment Plan), automatic withdrawal plans and the automatic reinvestment of dividends. You would basically need to give post-dated cheques (monthly or quarterly, periodic date of the cheque is fixed by the Asset Management Company). Most funds allow a monthly investment of as little as Rs500 with a provision of giving 4-6 post-dated cheques and follow up later with more. Regular monthly inve Source:
Question: How to identify funds whose investment objectives match your asset allocation needs?

Answer: Just as you would buy a computer that fits your needs and budget, you should choose a mutual fund that meets your risk tolerance (need) and your risk capacity (budget) levels (i.e. has similar investment objectives as your own). Typical investment objectives of mutual funds include fixed income or equity, general equity or sector-focused, high risk or low risk, blue-chips or turnarounds, long-term or short-term liquidity focus. Source:
Question: What are open-ended mutual fund schemes?

Answer: Open ended schemes usually do not have a fixed maturity period and are available for subscription and redemption on an ongoing basis. The units can be bought and sold any time during the life of the scheme at NAV related prices. Source:
Question: Is there any minimum lock-in period for my units in mutual funds?

Answer: There is no lock-in period in the case of open-ended funds. However in the case of tax saving funds a minimum lock-in period is applicable. The lock-in period for different tax saving schemes are as follows:-

Section Minimum lock-in period
U/s 88 3 yrs.
U/s 54EA 3 yrs.
U/s 54EB 3 yrs.
Question: What is an Asset Management Company (AMC)?

Answer: The company that manages a mutual fund is called an AMC. For all practical purposes, it is an organized form of a money portfolio manager. An AMC may have several mutual fund schemes with similar or varied investment objectives. The AMC hires a professional money manager, who buys and sells securities in line with the fund's stated objective. Source:
Question: What are Interval Schemes?

Answer: Interval Schemes are those that combine the features of open-ended and close-ended schemes. The units may be traded on the stock exchange or may be open for sale or redemption during pre-determined intervals at NAV related prices. Source:
Question: What are the different types of Mutual Funds?

Answer: Mutual Funds are classified by structure in to:

Open - Ended Schemes
Close-Ended Schemes
Interval Schemes
and by objective in to

Equity (Growth) Schemes
Income Schemes
Money Market Schemes
Tax Saving Schemes
Balanced Schemes
Offshore funds
Special Schemes like index schemes etc. Source:
Question: Kindly suggest if arbitrage funds are ok for earning high returns with low risk.

Answer: Don't be under the wrong impression that arbitrage funds are equity funds, which will give you high returns and also protect your downside.

Arbitrage funds are a unique fund in the sense that:
As far as the risk profile and returns are concerned, they are like a debt fund i.e. low risk and low returns.
However, as far as the tax laws are concerned they are treated on par with equity funds and as such the long term capital gains tax is nil (however note that a few arbitrage funds Source:
Question: What are the factors that influence the performance of Mutual Funds?

Answer: The performances of Mutual funds are influenced by the performance of the stock market as well as the economy as a whole. Equity Funds are influenced to a large extent by the stock market. The stock market in turn is influenced by the performance of the companies as well as the economy as a whole. The performance of the sector funds depends to a large extent on the companies within that sector. Bond-funds are influenced by interest rates and credit quality. As interest rates rise, bond prices fa Source:

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