How to Edit and draw up Direct Deposit Form Online
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How to Edit Your PDF Direct Deposit Form Online
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How to Edit Direct Deposit Form on Windows
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PDF Editor FAQ
What was the strangest cultural thing you have experienced as a foreigner/visitor in the United States?
I wouldn’t say strangest but these were very different compared to what I am used to in India.Water Fountains - People in the USA drinking water from fountains; when my wife told me that she noticed it in O’Hare airport I didn’t believe her for weeks till I saw with my own eyes.Edit: Since so many are asking about what’s wrong with the drinking water fountain in comments I am adding this to clarify.There is nothing wrong with drinking from the fountain and it is well maintained and hygienic as well. Just that I didn’t think drinking directly from the water source would be in practice in USA.As a note I didn’t know how to drink from it during the initial days; I thought there is a proximity sensor that would sense my presence and dispense the water. :-)2. Traffic - The absence of traffic in most suburbs and roads being virtually free when compared to India.3. Extremes in fitness - The average American is either extremely fit and exercises every day or overweight and trying or not trying to get the excess weight off.4. Reserved Parking - I was surprised that every parking lot has slots reserved for the differently abled; it’s a good thing though.5. Cost of Healthcare - Healthcare without insurance burns a hole in your pocket and even the premiums are expensive; it could range from $400 to $1000 per month depending on coverage level, types of benefits, etc6. Vast Empty Spaces - There are vast empty spaces along side highways, suburbs, villages and virtually everywhere.7. Parks/Play Areas - There are parks/play areas in every 2 or 3 miles and it includes playground/slides/swimming pools/ping pong tables/etc.8. Huge Parking Lots - Every mall/shopping centers have huge parking lots and nearly 50% of them are empty unless it is a very busy place. you don’t have to pay a dime in most places for parking.9. Lack of public transport - Public transport is practically non existent compared to India. There are very few buses in suburban areas and public transportation is aplenty only in huge cities like Chicago, New York, etc. Taxis are expensive and one typically pays $3 to $5 a mile in most places. Owning a car is a necessity rather than a comfort. Given below are some pics of the Chicago Union Station which is akin to Chennai Central/ Chatrapati Shivaji/etc in India.10. Limited Veggie options - You have to stick to McD, Burger King, Olive Garden, Subway, etc and few restaurants that offer veggie options during trips. There are just a couple or just a handful of options in most restaurants. In India the veggie food and cuisine changes even between two cities in the same state and there are thousands of cuisines/dishes that I am not even aware of; let alone taste. Also India has more restaurants that offer veggie rather than non veggie.Edit1: I am a veggie and travelled to just Buffalo, New York and Chicago (I live in Chicago suburbs). I didn't get any decent veggie options in a few minutes I took to search. There could be more veggie options if I had the time to explore. If you eat non veg then it's heaven and you will have a blast.Edit 2: Few have suggested me Find Vegan & Vegetarian Restaurants Near You - HappyCow to find veggie food near me; will definitely try that. Adding it to the answer so that fellow veggies are aware of it.11. Junk Food - Pizza/Burger/Fries/etc are available virtually everywhere and I am shocked to see this food being given to even Toddlers.12. Obsession with Soda - You see everyone carrying a cup of soda anywhere; malls/movies/restaurant/car/etc. Even toddlers consume lots of soda which is just sugar, carbonated water and flavour. Soda comes with 50% of the cup filled with ice unless you ask for soda without ice.13. Carrying coffee/soda to restrooms - Restrooms are among the filthiest places and I can’t imagine/understand why one would carry a cup of coffee/soda in to one. Ewww!!!14. Diapers and wipes in most restrooms - If you forgot the diaper/wipes for the baby and even if you need a quick replacement you can just check in the restrooms and you can get one if you pay $0.5 or $1. This is a very good thing in emergencies; you don’t have to run to a store to buy a diaper pack.15. Large Food Portions/Soda - Most food items come in large portions and we usually pack the leftover food and have it for the next breakfast/dinner. Soda also comes in huge sizes; AMC theatre has 40 oz cup for soda!!! The medium size is 32 oz and the small is 16 oz.16. Availability of Indian stuff - You are likely to get varieties of Indian vegetables, spices and other groceries in one place in many states in the USA rather than a market or departmental store in India.17. Availability of frozen Indian food - I got introduced to many Gujarati food items like Patra, Mathia, etc albeit frozen which I haven't even heard of when in India.18. Cool Water - Water from the fountain is really cool and one cannot drink more than two sips at a time unless used to it. Water in certain restaurants are also cool since they add ice to water and if you don't need it have to specifically ask for it.19. Cheaper Fruits - Fruits like Apple and strawberry are cheaper at peak seasons compared to India. A pound is sold for as low as $0.50 for apples and $0.33 for strawberries. Even if you convert it to INR then it's cheaper than in India; I guess because most of these are imported in to India.20. Strawberry/Apple picking - Anyone can pay a price and get in to fields to pick their own strawberries and apples. Such a thing doesn't happen in India and it has come to my notice that this is picking up steam in India as well. This helps farmers as well as consumers since it reduces cost of picking and transportation and let's consumers enjoy fresh fruits.Edit: Few have mentioned in comments that fruit picking has started in India too; happy to hear that. Hopefully I can pick some fruits when I return to India but it is not prevalent as in the USA.21. Easy to get Credit Card/Loan - It’s pretty easy to get credit cards/vehicle loans when you have a SSN. Just a month after being here one can get credit cards or loan but the interest rates will be higher and won’t get many 0% APR offers but that changes after a year or so. Too many credit card offers flood the mailbox. America is more of a spending economy and it seems to be reflected in credit cards/loans. In India it’s a nightmare if you have more than a couple of credit cards and you are on the look out for a loan; no.of. credit card accounts reduce your credit score adversely.22. Minimal Savings - Many Americans cannot manage expenses if they miss a paycheck because they already in to monthly payments due to credit cards/loans.The Secret Shame of Middle-Class Americans Living Paycheck to PaycheckMost Americans can't handle a $500 surprise bill23. Costly prepaid plans -It’s costly compared to India in that the prepaid plans require payment every month rather than giving a fixed talktime and validity for the money paid. In India you can pay 250 INR (about $4) and you will get talktime worth 250 INR (approx 1000 mins of calls) and validity of three to four months to use up the talktime. Data is separate you would need to shell out $2 to $5 depending on 2G/3G/4G/LTE and is valid for a month. I imagined these would be cheaper in USA since it’s a developed country.24. Costly Broadband - You need shell out anywhere between $25 and $50 per month for broadband and the speeds are high compared to India. But you are stuck with Comcast in most parts of the country and don’t have any options; not to mention their infamous customer service. :-)25. Pay bills online - Almost 99% of the bills could be paid online and it is free of charge in most banks.26. Signup bonus - Many banks offer sign up bonus between $50 and $300 for opening new checking accounts and credit cards; this is unheard of in India. they do offer some discounts and cashbacks but sign up bonus isn’t common.27. Low interest rates - Savings account get very less interest rates around 1% to 2% or even lesser; while it is around 5% to 6% in India.Savings Account: Compare & Open Savings Account Online28. Steep Discounts - Products like Macbook, iPhone get either discounts or gift cards ranging from $100 to $300 at third party retailers like BestBuy which is not the norm in India.29. Large number of phones sold by network carriers - Every one buys phones from carriers by way of contracts/paying in full/discounts, etc in loads. In India retailers are the ones that sell most numbers; carriers have a minimal share. Most phones are bought unlocked and paid in full; so many don’t buy expensive phones which they cannot afford to pay immediately.30. Timeliness - Everyone is on time for work/meetings/etc. They would arrive early rather than arrive late. If the agreed upon time is 10 AM then it is 10 AM; not 10:05 AM or 10:10 AM.31. Secure doors in apartments - Doors to apartment buildings are secured through security codes and cannot unlock without it. Package delivery teams also don’t have access to security codes and deliver at mailbox or apartment management office or place it near the door. Even the fire department personnel don’t have access to it; I had assisted them once when they couldn’t open the door to the apartment with the keys. :-)32. Fall Colors - There is no season that can be clearly termed as Autumn in India and the trees retain most of the leaves during the season and remain evergreen. In the USA you see enormous amounts of colors even while driving/walking in the streets.33. Need permission to burst crackers - You have to take permission from officials/communities to burst crackers whereas in India we take it for granted and burst as much as we can. All we do now is just burst some sparklers and get to temple to see the real fireworks. Fireworks are on display during July 4, New Year, etc but never the same as in India.34. Certain places have same names - For example there is a Geneva, IL - Official Website in Illinois which might confuse some who are aware of the popular Geneva - Wikipedia in Switzerland. There is a Prospect Heights, Illinois - Wikipedia in Illinois as well as one Prospect Heights, Brooklyn - Wikipedia in Brooklyn.35. USA is very big and vast - This can be illustrated with the fact that United States uses nine standard time zones. From east to west they are Atlantic Standard Time (AST), Eastern Standard Time (EST), Central Standard Time (CST), Mountain Standard Time (MST), Pacific Standard Time (PST), Alaskan Standard Time (AKST), Hawaii-Aleutian Standard Time (HST), Samoa standard time (UTC-11) and Chamorro Standard Time (UTC+10).Time Zone36. Roads are silent - No one honks unless a person blocks the way or does something dangerous/stupid on the road. It’s very silent except for the engine sound and cars passing by on most roads.37. Buying and driving car is easy - Buying a car is like buying a cycle in India. You can get loans from a bank for the car’s entire value (including registration, etc) and you needn’t a single penny upfront. All you need to do is sign the papers and pay the monthly dues. Driving is also easy since most follow traffic rules and most cars have automatic transmission and don’’t have to worry about shifting to the correct gear.38. Driving over Speed limit - Many drive over the speed limit; when I say over it doesn’t mean by 2–4 mph it’s usually above 10 mph. It’s a nightmare to change lanes in freeways in Illinois when adhering to the speed limit; you have to be above the speed limit to change lanes unless the freeway doesn’t have much traffic. Traffic tickets cost a lot but doesn’t seem to prevent many from driving over the limit.39. Gun Culture - This is always in the news and every weekend sees a dozen gunshots fired in/around Chicago wounding few and killing few. It’s really scary when you see the news and you remember you were at the same spot just a week ago.40. Cinemas - AMC offers tickets for $5 - $6 during Tuesdays and morning shows on weekends. The tickets are really cheap when you compare against a popcorn or fry costing $5 - $10. The movie experience is good nevertheless.41. Tipping Culture - Workers in restaurant/taxi/pizza delivery/etc business are usually underpaid and customers are expected to tip at least 15% to make up for low wages. It’s a necessity and not extra money like in India. If you don’t tip it’s considered as rude or that service was poor and some might even ask you why there was no tip.42. Free refills/discounts - Many restaurants offer free refills on their large size sodas for $0.25/$0.5 or for free. AMC theatres has a large cup which is reported to be 54 oz for soda and offers free refill as well; I am not sure if anyone refilled the large cup. Also you get free refill for the Large popcorn bags at AMC.AMC also offers discounts/rewards for members based on the money spent in AMC; its around 10% i.e., if you spend $50 you get back $5 that can be used for tickets/snacks/etc.Disclaimer: I am not endorsing AMC; just gave it as an example.43. Imperial System in practice - I was surprised to see weight specified in pounds and fluid in ounces; I thought these were done away with till I came here.44. Everyone is courteous and polite - Most people are courteous/polite and greet you in roads/malls/shops/etc which doesn’t happen in India. We usually greet only known persons in India; otherwise you get weird looks. But the courteousness/politeness seems to disappear when driving a car.45. World Cuisine - You can get any food ranging from Chinese to Mexican (I mean all types of food across the world) and if you eat non veg then you are in heaven. Cheese is of entirely different quality from that used in India. I fell in love with Pizza and Pasta and I am not sure if I can get Pizza/Pasta that tastes so good any where in India.46. Variety of Fruits - You get variety of fruits ranging from Apple (I don’t know how many varieties are there.. I have eaten Gala, Red Delicious,Granny Smith, Pink Lady, Braeburn, Empire, Golden Delicious, Jonathan, JonaGold, Fuji and there are many more I haven’t tried yet), Cherry, Strawberry, Durian, Mangosteen, Jackfruit, Mango, etc. I bought Durian once and will never eat it again; it’s gooey like beaten/heated Cheese and the smell is awful.45. Education cost - School education is virtually free; the few hundred dollars fee per year wouldn’t even be enough to maintain schools whereas in India I would have to spend few hundred dollars for a quarter in most schools. Cost of college education is ridiculously high and almost every student is in huge financial burden irrespective of the part time jobs.46. Drive in - I couldn’t imagine a drive in before I came to the USA. Drive in ATMs and fast food is convenient but don’t understand why many don’t sit down and have a quick bite rather than eating in the car. I am still used to it and usually park the car and walk in even if I need a coffee.47. Hot water in taps/baths - To get hot water all you need to do is open the tap. We are used to turning the heater ON and waiting for 5/10/any minutes for getting hot water for bath and other purposes.48. No water in the poo-poo area - Western toilets are widespread in India these days but they do have a tap/water source from which one can clean up and dry yourself with paper after the business but in the USA you have to get used to just the paper.49. Concept of City - City in India means a well developed/urbanized area that can sprawl up to thousands of square kilometers but in USA it would mean a small area running up to a maximum in hundreds of square miles.50. Relatively quiet and queue-less banks - Banks are often overcrowded and need to wait for at least an hour to make deposit money or do any other banking activity. There are numerous ATMs where you can make deposits as well but many prefer to make it in person in the branch. In comparison banks in USA are relatively empty most of the time and you can walk out within few minutes and no tokens needed for any activity; you just head to the counter.51. Bank account can be opened online - Sure there are online applications in India too but you need to visit the branch to submit the form and proofs, make the initial deposit and get the account activated. Even these can be done online in the USA from the comfort of your home; all you need is scanned copies of the proofs.52. Coffee/Comfortable seats in Banks- Most banks in USA have candy/coffee for the customers and the waiting seats are among the most comfy ones I have sat in. You can wait in those comfy seats while the banking officer gets ready for your request. India has seats too for waiting but nowhere near to these and its not possible when there are huge crowds.53. Double Fees for using other ATMs - One can do up to 4 transactions in a month at other bank ATMs for free in India whereas in USA you maybe charged by the bank that issued the card and also by the bank that owns the ATM.54. Different apparels in different seasons - Most regions in India are hot throughout the year and there isn’t a need to have different clothes by season; most dresses will do good throughout the year. Due to the extremes in weather in summer/winter different types of clothes are needed in the USA; I knew about this even before entering the USA but never imagined the scale of the new product launches during the different seasons.55. Dark Coffee/Tea - Most in the USA consume dark coffee/tea without adding cream/milk but this is unthinkable for an average Indian. The way coffee/tea is made is way different where in the milk is in abundance and then the coffee/tea is added for taste.I will keep adding as and when I remember…I had written an answer for a similar question; please refer link below for more details.Balaji Viswanathan's answer to What is it like to be an Indian living in a foreign country? Does it affect the way you live? Do you still carry on with Indian rituals? Is it difficult to be an Indian person in another country?
I am 36. My goal is to make 10 lakhs in 5 years through SIP. What should be the ratio of funds based on monthly investments to achieve this?
The amount you will need to contribute monthly to an SIP depends on the return you are earning on your portfolio. For e.g., with 10% p.a. return on your investments, you will need to contribute Rs 13,500 per month to meet your target of 10 lakhs in 5 years. If you earn 16% p.a. you will need to contribute Rs 12,000 per month. That is Rs 90,000 more that you will have to save over the course of 5 years to reach your target! However, only equities will earn you 16% and in a 5 year horizon, they may be a market dip that prevents you from hitting your target.The return that you earn with your investments depends entirely on the composition of your portfolio. Mutual funds invest in debt or equities. Equity mutual funds are more volatile but their returns are higher. Debt mutual funds are more stable but their returns are lower. How you mix and match the two in your portfolio determines how much return you will earn on your investment. If you are flexible on your 5 year horizon, but want to make the most money, lean towards more equity. If you have a hard 5 year goal, then lean towards more debt.Designing your portfolio should entirely depend on how much risk you as an investor are financially or psychologically capable of taking. Sure, an equity-heavy portfolio earning 16% p.a. sounds very attractive, but if you are not comfortable with the risks associated with investing in equity, it might not be the right choice for you.Take a look at this image comparing the long term returns of different types of debt and equity funds - along with some savings options like Savings Accounts and Bank Fixed Deposits (Liquid Debt).As you can see the investment value of equity funds fluctuates a lot. It is difficult to tell where the market is going in the next 2-3 years. You can see that in the period of 2008-09 the equity market fell drastically. The worst 1-year loss was nearly 70%. 5 years is too short an investment horizon for equity funds.Debt funds offer capital protection as well as modest returns. These returns are higher than comparable ‘investment’ alternatives like Bank Fixed Deposits along with the added advantage of lower tax as well as flexibility.Another factor that will affect your returns is investment expenses (a.k.a. Expense Ratios). Most mutual funds are offered in two forms - the Regular plan and the Direct plan. Regular plan deducts 1.5-3% of your investment p.a. while the Direct plan deducts 0.5-1.5% of your investment annually, despite following the same exact investment strategy. The example at the beginning of this answer assumes a 0.75% expense ratio. If you increase by 1.5% (a seemingly small amount) your monthly contribution needs to increase to Rs 14,000 (at 10% p.a.) to meet your target. So remember, lower your investment expenses and go direct.You can visit my website, Savvy Investments, and get a free customized recommendation for a direct plan mutual fund portfolio, keeping in mind your wealth creation goals as well as your short term investment horizon. You can see the past and future expected performance of your suggested portfolio as well as a few other portfolios with different combinations of debt and equity. And our easy-to-use platform lets you invest in direct plans of mutual funds from multiple AMCs from a single platform.
How can I learn mutual funds investment?
WARNING: LONG ANSWER AHEAD. READ ONLY IF YOU WANT TO KNOW EVERYTHING ABOUT MUTUAL FUNDS. BOOKMARK IT IF YOU WANT TO READ LATER.Indians are no stranger to mutual funds. Asset management companies (AMCs) and fund distributors alike continue to aggressively promote their investment products regularly. However, some of us may still wonder about how they work or what they are.In simple words, mutual funds are investment schemes (or plans) that are launched by asset management companies like Franklin Templeton, DSP BlackRock, Motilal Oswal, etc. where retail investors (people like you and me) can invest their money and experienced portfolio managers invest this collected money to buy shares of companies they think will earn good returns.In return for their services, the mutual fund house charges a percentage of the investment (not the returns!) from each investor. This is known as the Expense Ratio (ER). I will talk more about this later.Since you can already find a ton of Quora answers repeating the same words again and again, I have created a small visual illustration below to explain how mutual funds work.In case you are wondering, I used the name “Mr. Sharma” because, in the Indian society, Sharmas and their sons (Sharma Ji ka Beta) are some of the smartest people who do everything in an amazing fashion and set examples for others to follow(!)So, there you have it. Mutual funds are essentially hiring someone to handle your investments. The point here is that the mutual fund company may or may not invest their own money in the same mutual funds as yours, so any profits or losses are going to be borne by you, the investor (and nobody else!)There are three parties involved in the transaction:You, the person wanting to invest their moneyYour facilitator (such as a mutual fund distributor or registered investment advisor)Your mutual fund company (also known as an asset management company or AMC)To illustrate, in the visual example of Mr. Sharma, the parties involved were (1) he himself, who represents the investor, (2) a mutual fund distributor or registered investment advisor (on whose website he registered an account), and (3) Mr. Adhiraj, who is working as a portfolio manager representing the mutual fund company where Mr. Sharma has invested his money in.However, if you want, you can purchase the mutual fund units from the mutual fund company directly. In this case, there are only two parties involved.You, the investorYour mutual fund company (such as ICICI Prudential)Note: The only problem in purchasing the mutual fund from the company (AMC) directly is that you cannot easily track your investments in case you have invested money with multiple AMCs.Benefits of Mutual FundsMutual funds offer a number of benefits to ordinary investors like you and me, because:You don’t have to worry about picking stocks and sitting in front of the computer screen all the time. Instead, a trained finance professional (portfolio manager) who is an expert at it does it for you.You diversify your risks effectively because you have invested in multiple companies’ shares from multiple industries.You can earn higher returns on your investment in the long-term compared to conventional investment products like bank FDs (fixed deposits) and PFs (provident funds).Challenges of Mutual FundsThere are thousands of mutual fund schemes in India. It can be quite difficult to pick the right mutual fund plans for your investment needs.Many so-called “investment experts” and mutual fund distributors in India can misguide new investors into buying mutual funds that pay higher commissions to the distributors and might not bring the best returns. NOTE: This is only applicable to REGULAR funds.Mutual funds have a lot of complicated terms like TER, Exit Load, TREPS, ETFs, Sharpe Ratio, Beta, Weighted Average Risk, etc. So, it can take you some time to read and master those terms.Types of Mutual FundsWhen talking about the types of mutual funds in India, there are many, many types. If someone asks you, “how many types of mutual funds in India exist?” Your answer should be, “it depends”. Here’s why:Based on asset allocation – equity mutual funds, debt mutual funds, hybrid mutual funds, FoF mutual funds, and gold mutual fundsBased on positioning – large-cap mutual funds, small-cap mutual funds, multi-cap mutual funds, mid-cap mutual funds, small and mid-cap mutual funds, and large and mid-cap mutual funds.Based on reinvestment – growth mutual funds and dividend mutual fundsBased on the seller – regular mutual funds and direct mutual fundsSounds complicated? 😐Yeah, I thought it might.And that’s why here’s ANOTHER picture showing the different types of mutual funds (based on asset allocation) 😀To better understand how mutual funds work, you must know how they are classified based on their asset allocationI have briefly described each of the five categories below.Fund of Funds (FoF) – refers to mutual funds that collect money from individual investors to invest in OTHER mutual funds (often in foreign countries). For example, the Motilal Oswal NASDAQ ETF 100 Fund of Funds.Hybrid Mutual Funds – refers to mutual funds that invest in multiple asset classes, so they might invest in debt instruments (corporate bonds, for example) as well as derivatives (futures and options) and equities (large-cap stocks for example). For example, HDFC Balanced Advantage Fund.Equity Mutual Funds – refer to mutual funds that purchase stocks of companies only and no other asset class. Large-cap mutual funds invest in corporate behemoths like TCS, Infosys, ITC, etc., mid-cap mutual funds invest in companies that aren’t HUGE like Reliance Industries or WIPRO but cannot be considered as startups either. Examples of such companies would include the likes of Biocon, Tata Chemicals, RBL Bank, etc. Small-cap funds invest in acquiring shares of small companies like DCB Bank, FINOLEX Industries, Aster DM Healthcare, etc. Index mutual funds invest in indexes (NIFTY and SENSEX), thematic funds invest in companies belonging to a particular sector (such as the Healthcare sector), multi-cap funds invest in companies of all sizes (in terms of market capitalization). ELSS funds are the same as equity funds, but they offer tax benefits under Section 80C of the Indian Income Tax Act 1961.Debt Mutual Funds – refer to mutual funds that invest in bonds and debentures primarily, although they may also invest in money market instruments like commercial paper, Treasury bills and Treasury bonds, Certificate of Deposits, sovereign bonds, etc. Depending on the investment horizon/duration of the debt instrument, it can range from 1 day (overnight funds) to 91 days (liquid funds) to 3-6 months (ultra-short bond funds) to 1-3 years (short duration bond funds). GILTs have much longer investment horizons (5-10 years), but they are the safest of all investments in terms of default risk, though they still can suffer interest risk.Gold Mutual Funds – refer to mutual funds that invest in gold. But I guess you already knew that 😀NOTE: Mutual funds CAN invest in ETFs or exchange-traded funds, but they are NOT the same. NIFTY Index Fund is NOT the same as NIFTY ETF. However, NIFTY ETFs can be traded directly on the stock market, unlike index funds. Also, whether a company is small-cap, mid-cap or large-cap depends on its market capitalization which is calculated by the formula below:Whether a company is small-cap, mid-cap or large-cap depends on how the Securities and Exchange Board of India (SEBI) classifies it.As of January 2020, there are approximately 2,500 mutual fund schemes (or plans) in the market from some 44 mutual fund houses (or asset management companies AKA AMCs) in India.Mutual funds can be purchased from the Asset Management Company (AMC) (like Franklin Templeton India Investments) directly or through a mutual fund distributor or registered investment advisor (such as Goalwise).Regular Mutual Funds vs. Direct Mutual FundsWhile browsing websites for mutual funds, you must have seen images like this one below:As I previously mentioned briefly, mutual funds can be classified on the basis of who is selling them to you into 2 types.Direct mutual fundsRegular mutual fundsTo understand how mutual funds work, it is necessary to know how you can differentiate the benefits and challenges of choosing a regular mutual fund from a direct one (or vice versa).Direct mutual funds are those which are sold from the mutual fund house company to the individual investor (like you or me) directly.Regular mutual funds are like…Additionally…If you purchase a mutual fund’s units from a distributor like ClearTax, you will buy the Regular version of the mutual fund which can cost you as much as Rs. 32,00,000 or Rs. 32 lakhs.“Wait, what?”Let me say that again.If you buy the REGULAR version of a mutual fund, you WILL LOSE as much as Rs. 32 lakhs to commissions ALONE (or even more, if your invested capital is higher).Yeah… don’t believe me? Check this picture below.By purchasing DIRECT mutual funds, you save Rs. 32,06,000 or Rs. 32.06 lakhs as seen above. Once you understand how mutual funds work, you will NEVER go for REGULAR mutual funds ever again.“What the heck? What’s going on?”Wait, wait! I will explain.Remember when I spoke about the expense ratio at the beginning of the article? Well, this is it!So, what’s an expense ratio?Expense RatioFor any mutual fund, the expense ratio is computed by dividing the total expenses of the mutual fund by the AUM or assets under management.Mathematically, it can be written as:Want an example? Sure.Suppose that Mutual Fund X has Rs. 600 crores invested, so this becomes the AUM or assets under management for THAT specific mutual fund. Now, the total expenses of the mutual fund yearly are around Rs. 12 crores. Can you tell me what’s the expense ratio going to be?So, the expense ratio (ER) is going to be 2% of the fund. As you can see, the Rs. 12 crores are collected from the investors’ funds only. And more the expenses, less the money, and hence, less the profits, right?Regular mutual funds have WAY HIGHER expense ratios (or total expense ratios) than DIRECT mutual funds, because regular mutual funds MUST pay commissions to the fund distributors. This is why DIRECT funds are ALWAYS better.So, mutual fund distributors sell regular plans, and we want to invest in direct mutual funds. What to do? The answer is RIAs or Registered Investment Advisors.To invest in DIRECT mutual fund plans, you need to head over to RIAs or Registered Investment Advisors. Mutual fund distributors are NOT allowed to sell/promote DIRECT mutual fund plans, because there’s no commission involved for them. With regards to registered investment advisors, two viable options here are Goalwise and Zerodha. However, Goalwise offers investing recommendations while Zerodha does not. If you want to spend hours doing your research and choosing your mutual funds, go for Zerodha. If you want experts to handle your mutual fund selection and investments, Goalwise is the best option. I am NOT putting referral links, so I am NOT getting any commissions even if you sign up on those websites.So, whatever you do, stay AWAY from regular mutual funds, alright? 😉Growth Mutual Funds vs. Dividend Mutual FundsWhen talking about how mutual funds work, another VERY IMPORTANT differentiation is to be noted between growth mutual funds and dividend mutual funds.To explain how they differ, consider the two ways to make money from mutual funds:Dividend payoutsCapital (share price) appreciation (value increase)You make money from your mutual fund investments when the value of your invested capital increases. For example:If you have invested in debt funds, you are paid interest that adds to your principal amount.If you have invested in equity funds, the share prices of your owned stocks through the mutual fund’s portfolio increase and you can sell them for a higher price.So, this is known as capital appreciation (in the 2nd case i.e. equity funds). The second type is, of course, dividend payouts. You purchase units of mutual funds that in turn buy dividend-paying stocks, and when the company pays out dividends to shareholders, you too get your share depending on how many units of mutual fund you have purchased.So, growth mutual funds pay NO dividends. All the earnings of the fund are reinvested back in your principal capital. This means, if you invest your money in growth mutual funds, it will COMPOUND over time.“Compounded profits? Oh yes!”Exactly! And that’s why unless you are looking for a steady monthly income through mutual funds, you should choose growth mutual funds. However, IF you are looking for a monthly income, you can consider dividend mutual funds because…Dividend mutual funds payout the profits directly in the form of dividends. So, every week or month, you receive dividend payouts while your principal capital stays invested. However, it isn’t the most optimal way to invest, because you lose out on the additional income you could have earned from the compounding power of money. In other words, how mutual funds work depends on whether you choose the growth option or the dividend option.If you have read my answer thus far, you might already have gained a pretty good understanding of how mutual funds work. However, mutual funds are just one part of the whole aspect of personal finance. As you know, to control your finances, you need to do more than simply invest your money correctly although smart investments constitute a major part of the matter.But I hope now you are a lot more sure about mutual fund investments! :)A. Ramanujan