MUTUAL FUND

ABoon ForThose Who Do Not Invest Because Of Low Capital Base And Lack Of Knowledge, Time Or Advice:

Mutual Fund schemes are like baskets of investments. All investors participate in a particular scheme with common objective. The common fund so collected is invested in the market with a common objective for each scheme. Mutual Fund is investing directly in equity, debt and liquid schemes in the market. It costs relatively low management charges. Investors can enjoy freedom from worries of studying technical and fundamentals of each company, CD, bonds, overnight call rates etc. Many facilities are available to investors such as fresh investments, SIP, STP, SWP, switching among various schemes, redemption etc. These schemes are managed by highly qualified professional fund managers. Realized net gains/losses are distributed among the investors.

Mutual Fund schemes become more attractive due to abolition of entry load. There are hundreds of schemes to choose from. To avoid wrong decisions, investors need expert guidance. Investment through proper advisor/planner such as “Grow Rich Investment Plus” has become a need, as charges are based on our services.

Benefits Of Mutual Funds:

   

  1. Buy And Sell With Great Convenience: Identifying, researching and monitoring securities can be a full-time job that requires a lot of commitment. Investors can simply buy a mutual fund in the market that will save them a lot of time and regular monitoring of the performance of the individual securities that make up the fund.
  2. Do Not Put All Eggs in One Basket, Be Diversified: A single fund can hold many different securities, far more than what an individual investor can manage to hold in their individual portfolios. This diversification reduces the risk of loss due to problems in one particular company or industry.
  3. Mind Your Own Business, Let Your Investment Managedby Professionals: A mutual fund is managed by full time working professionals. The resources available to them like traders, research team and access to company management is far more than what an individual investor can achieve on his own.
  4. Get Your Money When You Want: Mutual fundschemes can be bought or sold freely so that investors have access to their money when needed. Mutual funds do not face illiquidity except in FMPs.
  5. Hedge against Inflation & Get Growth also: Traditional savings instruments cannot keep pace with inflation and the rising cost of living. You can use a mixture of mutual funds to achieve a better return than what you can get in a savings account
  6. One more Source of Earning: Can provide you with income if you invest in an income or dividend option or systematic withdrawal plan, along with giving you a modest capital appreciation
  7. Different from Life Insurance: A mutual fund is a capital market investment product that gives you a return based on the amount of risk taken by you.There are some types of life insurance policies that have an investment feature attached to insurance. Please understand that such type of hybrid products can be recreated by you by simply combining a pure life insurance product along with mutual fund schemes. And, you will pay lesser in fees if you do this on your own, because these hybrid products have much higher fees.

Role Of Funds In A Portfolio:

  1. Hedge against Inflation & Get Growth also: Traditional savings instruments cannot keep pace with inflation and the rising cost of living. You can use a mixture of mutual funds to achieve a better return than what you can get in a savings account
  2. One more Source of Earning: Can provide you with income if you invest in an income or dividend option or systematic withdrawal plan, along with giving you a modest capital appreciation
  3. Different from Life Insurance: A mutual fund is a capital market investment product that gives you a return based on the amount of risk taken by you.There are some types of life insurance policies that have an investment feature attached to insurance. Please understand that such type of hybrid products can be recreated by you by simply combining a pure life insurance product along with mutual fund schemes. And, you will pay lesser in fees if you do this on your own, because these hybrid products have much higher fees.

Selecting The Right Mutual Fund:

There are more than40 different Asset Management Companies and have more than 1000 mutual fundschemes in India. So, how will you choose which scheme to invest in?

  1. Know Your Own Needs: Are you investing to fulfill a short-term or a long-term goal? Or, are you investing just because you heard from a friend, a relative or a neighbor that you should invest in a certain fund? Not all mutual funds serve the same purpose, so you should know why you are investing. If you want capital appreciation for your son's education 20 years from now, you should not invest in a bond fund. However, if you want to save and protect your capital for funding your daughter's marriage in a year, then you should consider a conservative fund like a money manager fund or a short term fund, which will also give you some income with capital protection.
  2. Time Horizon: What period are you ready to invest in the market for? Equity funds should be held for at least 5 years because equities are long-term investment vehicles. Debt and money market funds are good for short periods.
  3. Track Recordof The Fund House:Allnew asset management companies cannot be successful in Indian market. We have many AMCs having successful track record of past 5-10 years. So, you may feel comfortable to invest in mutual funds that have successful track record.
  4. Past Performance: Past performance of a mutual fund scheme is not the guarantee of future performance. A fund may have performed well in the past for a short-term because of some favorable factors.It is important to invest in funds havingexcellent long term performancel across market cycles.

Mutual Funds and Taxes:

Here is all you would want to know about taxes applicable on Mutual Funds in India.

Taxation

Equity Funds

Liquid funds/Money Market Funds

Debt fund/liquid plus Funds

Short Term Capital Gain Tax

15.45%

As per Income Tax Slab

As per Income Tax Slab

Long Term Capital Gain Tax

Nil

Less of 10% without indexationor, 20% with indexation

Less of 10% without indexationor, 20% with indexation

Dividend Distribution Tax

Nil

28.325%

 
  • 80C Benefits through ELSS:Under the current tax laws, you can get an annual income tax benefit of up to Rs.1Lakh if you invest in Equity Linked Savings Schemes, i.e. ELSS.
  1. Minimum term for ELSS schemes is 3 years and you cannot withdraw your money before that time
  2. The education cess of 3% shall be levied to all investors.
  3. Short Term Capital Gain Tax indicated above is inclusive of education cess.

Dividend Distribution Tax indicated above is inclusive of additional surcharge and cess.

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