Entry load: This is largely levied to recover the marketing expenses of the MF. It is usually 2.25% of the investment, and is charged at the time of purchasing the units of the mutual fund (MF).

Exit load: It is levied to penalize early exit so that such exits are minimal. The exact time depends on the MF scheme - some schemes levy an exit load for exit before 12 months, some for 6 months. There are many schemes though that do not charge any exit load.

Open Ended: Here, the MF itself buys and sells units every day at the daily NAV value.

Close Ended: The MF redeems the units only at the end of the period for which the units were issued - that is the lock in period. But the units are listed on stock exchanges, and can be traded like normal stocks.


For more useful definitions, please visit the "Definition of Common Terms" section.

CAGR stands for Compound Annual Growth Rate.

Its meaning is very simple – it is the growth rate of a company expressed on an annualized basis. This is the average growth rate of the company over some years, and takes into consideration the effect of compounding.

Understanding the principle of CAGR is very important, because it is used at many places. For example, it is looked at while examining at returns generated by mutual funds (MFs). CAGR should also be used while considering any other investment.

Please read the article “What is Compound Annual Growth Rate (CAGR)?” to get a more detailed explanation.

The Sundaram Entertainment Sector fund is a thematic fund - which means that it focuses on just one sector. Therefore, it comes with substantial risk, as there is very little diversification. You should invest in it if you think that the entertainment and media sector is going to outperform the overall market.

In my opinion, the media and entertainment sector has huge potential, and is likely to grow very fast. This is especially true because the entertainment sector largely depends on spending by young people, and we have a very large young population with rapidly rising disposable incomes.

This fund would provide some diversification in the form of foreign holdings - it has kept an option of investing upto 35% in foreign stocks from the entertainment segment.

The fund should provide good returns in the long term. But you should invest in thematic funds only if you have other, larger holdings in diversified equity funds.

Thus, if you are already invested in some diversified mutual funds, you can invest some amount in this fund.

For more information on growth and divident options, please read "Mutual Funds - Growth or Dividend option?" at: http://www.raagvamdatt.com/Article98.html

Dear Vijaya,

Its good that you are planning to invest in the stock market through mutual funds - since you are new to the stock market, this is a very wise decision. Also, you have chosen the best option to invest in MFs - through SIPs.

What you need to remember is that investment in the stock market - either through MFs or directly - should be for the long term in order to get a good return. You should look at at-least 5 years.

How much you would invest depends on two things: How much money you can spare for investment (not just while you are working, but even when you leave your job for a year), and, how much out of this amount can you lock-in for the long term.

Depending on these two things, decide the amount that you can invest every month. Please remember - you should be prepared to keep aside the amount you invest in MF SIP for around 5 years.

A few other things:
- Invest in MF schemes that have been around for at least 3 years
- Invest in MF schemes having consistently good returns over the last 3 or 5 years
- Since you are just starting to invest, stay away from sector funds. Invest in diversified equity funds only.
- Try to break up your investment between 2 or 3 MF schemes. That way, you would be able to diversify.

Happy investing!