Question 1

What is expense ratio in mutual funds?

Accepted Answer

Expense ratio is the annual fee a fund charges as a percentage of assets under management. It covers fund management, administration, and distribution (in regular plans). Lower expense ratios leave more of the market return in your pocket — especially important for index and large-cap funds held long term.

Question 2

What is the difference between direct and regular mutual fund plans?

Accepted Answer

Direct plans are bought without a distributor commission — they have lower expense ratios. Regular plans include distributor trail commission. Both invest in the same portfolio; the difference is cost. Long-term SIP investors often prefer direct plans via AMC or registered platforms.

Question 3

What is the lock-in period in ELSS mutual funds?

Accepted Answer

Equity Linked Savings Scheme (ELSS) funds have a mandatory 3-year lock-in from the date of each SIP or lump-sum instalment. ELSS qualifies for Section 80C deduction up to ₹1.5 lakh. Compare lock-in and risk level against PPF or tax-saver FD before you commit.

Question 4

How are mutual fund returns taxed in India?

Accepted Answer

Equity funds: long-term capital gains above ₹1.25 lakh per year are taxed at 12.5% (held >12 months); short-term gains taxed at 20%. Debt funds taxation changed from FY 2023–24 — gains are generally taxed per your income slab regardless of holding period. Check current IT rules before redeeming.

Question 5

What does the riskometer on a mutual fund mean?

Accepted Answer

SEBI mandates a riskometer from Low to Very High based on the fund’s asset allocation and volatility. It is a broad label, not a guarantee. Match the riskometer to your goal horizon — equity funds suit long goals; liquid or overnight funds suit emergency reserves.

Question 6

Is SIP or lump sum better for mutual fund investing?

Accepted Answer

SIP averages purchase cost over time and suits salaried investors with monthly surplus. Lump sum can work when markets are depressed and your horizon is long, but timing is uncertain. Use our comparison tool to align fund choice with your goal, then decide SIP amount via a SIP calculator.

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