Mutual Fund Investing Rules – A Guide for Mutual Fund Investors

Easily claim and track your income tax refund with this comprehensive guide. From understanding eligibility criteria to checking refund status, streamline your financial management.

Investing in mutual funds is a popular way to participate in India’s thriving financial markets. If you are interested in investing in mutual funds, you will need a few tips to get started, and the SEBI guidelines for mutual funds are a great place to start.

For serious investors in India, it is critical to grasp SEBI regulations for mutual funds as knowing the rules keeps you well informed. Here is a guide about the way things work while trading in mutual funds.

How to Buy Mutual Funds?

The Securities and Exchange Board of India (SEBI) mandates how mutual funds are officially invested within India. SEBI regulations for mutual funds lay out certain technical rules for investing in mutual funds. Nonetheless, mutual funds possess unique structures and there are specific aspects related to the rules of investing. 

If you want to know the rules yourself, you can always look up the SEBI guidelines for mutual funds PDF. However, it is not difficult to trade in Indian mutual funds, and they can be bought and sold from the mutual fund house directly or through intermediaries that facilitate investment.

Investors may purchase units of a mutual fund via a variety of avenues including from Asset Management Companies (AMCs) or brokerages online. Both AMCs and brokerages may outline mutual fund rules and aid you in your investment preferences. Asset management companies are those firms that may offer investment opportunities and instruments through various channels to investors. Brokerages are companies that offer investors many financial services, including trading opportunities and investments in mutual funds. 

Nowadays, application to a mutual fund may be done through mobile apps and various online platforms that expose you to SEBI regulations for mutual funds as well.

Doing Your Research

You may find the information you need about mutual funds in the SEBI guidelines for mutual funds PDF, you can also gain a wealth of knowledge about trading rules through other sources. Before you invest, it is important to conduct rigorous research to identify funds that match your tolerance for risk, financial aims, and preference for the investment period. You may also make yourself familiar with some mutual fund rules.

You can explore various websites of AMCs, online portals about mutual funds, certain online portals of banks, and brokerage platforms. All these give you a plethora of information about any mutual fund’s track record, types of funds, exit loads, expense ratios, and mutual fund switch rules in case you wish to switch funds. You should also note that while doing your research, you may come across various issues like, say, the consequences of early redemption or closing a fund early. This may give you knowledge about your future investment and help you make more informed decisions.

The Best Sources of Information

Your top source of information about any fund you are considering should be the company website operating the mutual fund. You can find all the information you need about the fund here, including its portfolio, its past performance, and its goals.

Further research into financial websites may give you insights about competitive funds and various other commentaries from experts. In case you are already registered with an online brokerage, you may likely find information about risk metrics. 

As is the case with any investment you are considering, you have to be sure about what you are getting into, and the SEBI website may be a good knowledge base. In the SEBI Guidelines for Mutual Funds PDF, you may find valuable information that aids in your choice of a fund.

When to Buy and Sell

The buying and selling of mutual funds can be viewed from different angles. On a broad scale, if you’re thinking about the best time to invest, it all depends on the portfolio of the fund and the fund’s fundamentals. There are no mutual fund rules that suggest when to buy and sell mutual funds as this depends on your distinctive financial goals and time horizon. 

From another view, you may wonder when the best time of day is to buy and sell mutual funds. Here, SEBI regulations for mutual funds may give you clues. You have to note that the share prices in funds do not fluctuate during the day. Rather, the fund makes a calculation of total portfolio assets in the fund, the NAV or net asset value, after the close of the markets. You may apply to buy units of a mutual fund at any time in the day, but your allotment will only occur after the NAV has been calculated. SEBI guidelines for mutual funds state this.  

About Fees

Mutual funds are meant to be a long-term investment. In case you sell too early or trade very frequently, fees and certain penalties could be enforced. Here are the common fees charged according to mutual fund rules:

  • Expense Ratios: These are charged to cover the operating costs of the fund, typically subtracted from fund assets. 
  • Exit Load: This is charged in case investors opt to redeem units before a certain period.

Trade and Settlement Dates

Trade dates with their corresponding settlement periods are laid out in the SEBI regulations for mutual funds. The date on which you place orders to purchase or sell any units of a mutual fund is the trade date. The date on which your transaction is completed is the settlement date. On the settlement date, your units are credited to your account or debited from your account. If you read the SEBI guidelines for mutual funds PDF, you will see that any settlement occurs based on T+1, meaning that settlement occurs one business day after the date of the trade.

Selling Mutual Fund Shares

If you wish to sell your mutual fund shares, you can do so through the original fund house or your brokerage. You will need to place a request for redemption. After selling your shares, the proceeds will be credited to your account. According to mutual fund rules, the amount you finally get will be calculated after subtracting certain fees. 

Early Redemption Rules

Mutual funds are created to be long-duration investments. In case you wish to seek early redemption, mutual funds charge fees (exit loads) based on SEBI guidelines for mutual funds. This is because a single action of redemption triggers certain implications for all fund holders, such as the distribution of capital gains. Additionally, fund houses have to liquidate assets to provide redemption amounts as they have no cash on hand. To cover this, fund houses charge fees for early redemption. 

Mutual Fund Trading Rules – Final Lines 

Before you invest in mutual funds, you must be clear about mutual fund rules. In particular, you must know about the specific rules concerning the mutual fund you have chosen, including mutual fund switch rules. It is worth doing some sound research so that you can navigate the ecosystem of mutual funds effectively and achieve your distinctive financial aims seamlessly. Once you know about the rules for investing and trading in mutual funds, you can easily open a Demat account with Angel One and start your investment journey.


Is it possible to withdraw funds from a mutual fund at any time?

An open-ended mutual fund can be withdrawn at any time unless it is an ELSS fund with a lock-in duration of 3 years. This means that you are able to withdraw from the fund when you wish to do so, but be sure to check for early withdrawal penalties.

Does a mutual fund's NAV change on a daily basis?

A mutual fund’s NAV, or its price, is decided once a day, after the close of the markets. Therefore, if you wish to find out the NAV before the close of markets, the previous day’s NAV may apply.

What is the T+1 rule of settlement of trades?

This means that any trades you undertake are settled in one business day after the execution of the trades. In case you perform trades on a day before a holiday, your trades will be settled on the next business day.

What is SEBI?

SEBI stands for the Securities and Exchange Board of India, the body that regulates the security and commodity markets in India. This is a regulatory body that works under the governance of the Ministry of Finance of the Indian government. It was given its statutory powers via the SEBI Act, 1992.