A mutual fund is a professionally managed company that collects the money of many investors and invests it in securities such as stocks, bonds and short-term debts, equity or bond funds, and money market funds.
Mutual funds are a good investment for investors who want to diversify their portfolio. Instead of focusing everything on one company or sector, a mutual fund invests in different securities to try to minimize portfolio risk
.
The term is typically used in the United States, Canada, and India, while similar structures around the world include the SICAV in Europe and the open-type investment firm in the United Kingdom.
Once invested in a mutual fund scheme, any change you wish to make in terms of changing plans (regular/direct), options (growth/dividend), or change in schemes within the same fund house will be considered as a sale (redemption). So making any such change is possible, but like the redemption, these changes will attract the exit burden and capital gains tax depending on how long you’ve been invested. The only difference between changing the scheme and making a request for reimbursement is that in the case of the first, the money is invested directly in the new scheme while in the second, the money is credited to your account and you can choose to invest the repayment proceeds in a different scheme
later on.
If you have invested in a net wealth-oriented (EOS) scheme and you change your investments before completing a year, the applicable exit burden (if any) and the short-term capital gains tax of 15% will be collected. If you have completed more than one year, the long-term capital gains tax of 10% will be collected on capital gains of 1 lakh
INR in that particular financial year.
