- Mutual Funds
- What is Mutual Fund - Concept
- Why Mutual fund sahi hai
- Types of Mutual Funds
- Taxation of Mutual Funds
What is Mutual Fund
Mutual Fund is a form of the new generation investment vehicle through which a layman can trust his hard earned money with professional asset managers and firms who then further cautiously build an investment portfolio that can yield the optimum returns over a period of time.
There is plethora of investment opportunities in the stock market today. A Mutual Fund manager first classifies the potential Sectors of the Economy to invest in, then with proper research and due diligence he chooses the best Stocks/ Companies on the basis of their fundamentals of business and their performance in market. From what the world governs today, Mutual Fund investment is the need of the hour to stay afloat in the volatile market conditions. They are one of the most simple and trustable investment tools.
Since long various methods of investment were practiced by our forefathers as a form of the unorganised sector of Economy. There used to be kitty parties where women trusting each other would contribute monthly, chit fund practices, unorganised lending, etc. But this used to be on a smaller scale and it included much higher risk and uncertainty of returns. Many have been involved in yesterday's unorganised investment practices and under the name of fake money rotation schemes; many have also burnt their hands. The main reason behind this could be lack of proper information and awareness amongst potential investors.
With help of Mutual Fund you can grow more and more with safe handes.
Types of Mutual Fund
You can boost your finances with some careful planning. Below list will help you to know more about financial goal and filter type of Mutual Fund
- Equity Fund
- Debt Fund
- Hybrid/Balanced Fund
- Gold Fund
- International Fund of Funds
What we do.
Simply, we understand each of our client's unique financial goals and design a strategy for them to follow and guide them mutual fund schemes best suited as per their objectives. Our approach is not merely to assist you in executing mutual fund transactions. we spend a lot of resources and efforts on researching & shortlisting the best of the best funds for our clients and handhold them in their investment journey till they reach their goals.
- Wealth Creation
- Tax Saving Investments
- Fixed income Solutions
- Retirement Planning
- Goal Based SIP
Why Mutual Fund Good for Us
How mutual Funds help you in achieving financial goals?
From telephone booths to small mobile phones and today smart phones. The world around you is constantly changing. Internet is the new oxygen today. You don’t need cash today to buy a chocolate even. The world is on the verge of encountering digital and financial revolution.
We’ve evolved in each and every avenue known by the world. The Financial Sector is at its best. Today’s high tech jobs seldom allow the consumer to manage his money and savings. The modern technology allows the consumer to sit back and relax while his money works for him and not vice versa. Mutual Funds allow you to put your money in such investment vehicle which is not only different from the pre-dominant schemes but also are progressive and tax efficient.
If you’re reading this right now, on your laptop or any other device at your home or any other place, it means you’ve invested enough on your education as well as other amenities provided to you today. Why not take advantage of those investments today? In simple words, Be it a Businessman, Student, Salaried workers or a normal Laborer everybody saves, i.e. they keep some part of their income away from the main income after consumption. Everybody can either invest in one of the various traditional investment schemes like Fixed Deposits, Recurring Deposits, EPF (Employee provident fund), PPF, Post office deposits or LIC policies. All of them provide almost same returns and they’re not inflation adjusted.
Investment through Mutual Funds is the present day vehicle which maintains tax efficiency and they also keep pace with inflation.
Mutual Funds provide you an edge over other investment vehicles in following four broad ways:Diversification
Different Funds are managed according to their objective of investments; this gives the customer an added benefit of diversification. A customer can choose according to his preference and his risk appetite the fund he would invest in. Hence, the scope is not limited to a particular scheme or just stock markets. His risks are divided and his returns are optimized that too with a minimum amount of just Rs 500.
Professionalism
A Fund Manager is a highly qualified and experienced person to whom you hand over your money. A Layman would not want to enter any rigmarole of verifying balance sheets day to day to know the reliability of the firm or to measure volatility of its stocks. Unlike entering markets directly and playing with bare hands, Investing through mutual funds widens your purview of your investments that too under proper research and expert advice.
Optimal Returns
The returns under Mutual Funds are by far the highest comparatively to other investment vehicles in the long run. The age long investment vehicles like F.D , R.D, Post office Deposits, EPF, PPF and Life insurance policies lack in exposure from market and also the returns are relatively low over a period of time.
Whereas other investment options like Real Estate have low liquidity and also they require be constantly supervising and maintaining, also the liquidity is very low as compared to Mutual Funds where you get your money in your bank account within three working days of request. Gold is again a great option but its return depends upon international markets.
Mutual Funds provide great returns over a period of time, which are perfectly liquid and averages out cost for investors.
Tax Efficient
It is important to save, it is more important to invest but what is most important is to invest wisely. When we use the word wise, it doesn’t just end up getting better returns but also your returns must be tax efficient. Mutual Funds are one of the best tax efficient investment vehicle available in the markets today.
There is a category known as ELSS funds wherein if you invest upto 150,000 per annum you get income tax deduction u/s 80 C.
Moreover in all Equity oriented funds the long term capital gains tax (if you redeem after 1 year from the date of investment) is favourable i.e. upto Rs. 1 lakh gain is exempt from income tax and gain above 1 lakh is taxed at 10% irrespective of your income tax slab rate.
What is important is to KNOW your NEEDS and HOW to reach there and how much TIME you need for the same. Answering following questions can help you decide.
- What Do You Want From Life In Next 5 Years
- Do You Know How To Reach There?
- Have You Made A Strategy?
- Are You Working On It?
- Is Your Money Working For You As Well?
The answer of above questions leads to the action steps of today. “The right time to plant a tree was 20 years ago; the second best time is TODAY!”
Types of Mutual Funds
Equity Mutual Funds
As the name suggests, your money is directly invested into Equity market under these types of funds. The Primary Objective here is Capital Appreciation over a long period of time. You don’t need high amount of funds to enter here as one may start with just ₹500 per month. There are different sub types under these.
Large Cap Fund
A large part of your money is being invested in companies with a large market capitalization. They are established stable and big businesses in their area of functioning. As per their goodwill and being the leaders in their sector they offer sustainable returns in long time.
Mid Cap Funds
These invest in Midsized Companies which could be tomorrow’s big businesses. These companies offer potentially higher returns with likewise risk.
Small Cap Funds
The Small Capital Stocks mainly include start ups and relatively smaller companies who are still in their early stage of development. They carry great potential once they achieve a prominent position in Share market.
Multi Cap Funds
These Funds offer you a mix of large, mid and small Cap funds. They form a balance between sustainability and capital appreciation. It is a modern way of managing risk as well as value of money.
Sector Funds
These funds invest your money in a particular sector of the Economy like Banking, Technology, precious metals etc. For example Technology Funds would invest in technology stocks like Infosys, TCS etc. They carry higher level of risk with proportionate level of making likewise returns.
Thematic Funds
These funds target a specific Theme of the Industry. For example Infrastructure funds would invest in such stocks who directly or indirectly related to that particular segment. These Funds identify the potential sectors and stocks in that particular theme which could generate reasonable returns.
Tax saving Funds (Equity Linked Saving Scheme)
Investing in these funds can help you taking dual benefit of saving your taxes under Section 80 C and also generate capital appreciation and create wealth over a period of time.
Debt Mutual Funds
These funds invest in fixed income investment vehicles like Bonds, Government Securities, Treasury Bills, Debentures and Commercial Papers. These are relatively safer funds suitable for both Capital Protection and Income generation. They can be classifies as gilt funds and short term and long term funds, Capital Protection Oriented Funds etc.
Hybrid Mutual Funds
Here a balanced approach is used while investing your money. Through these type of funds one can invest in both equities and fixed income schemes. They’re best for both Growth Potential and Income Generation. A few examples are Balanced Funds, Asset allocation funds, monthly income plans and Children’s Benefit Funds etc.
Taxation of Mutual Funds
Under Equity Mutual Funds, any period before completion of 1 year from the date of allotment of units is considered as short term and a Short Term Capital Gain Tax of 15% + Surcharge and Cess is being charged on capital gains. However, after completion of 1 year from the date of allotment if you redeem mutual fund units any capital gains generated will be taxed at 10% with an exemption of first Rs. 1 lakh gain.
| FUNDS | Short Term | Long Term |
|---|---|---|
| Equity Funds | Less than 12 months | 12 months or more |
| Non-Equity Funds | Less than 36 months | 36 months or more |
| FUNDS | Short Term | Long Term |
|---|---|---|
| Equity Funds | *15% | Gains over 1 lakh are taxed @ 10% |
| Non-Equity Funds | As per tax slab | *20% after indexation |
*This % is as per current income tax laws. Subject to policy changes by the Government.
The taxes are being levied as per the time period of investments categorized as long term and short term period.
Under Equity Mutual Funds, any period before completion of 1 year from the date of allotment of units is considered as short term and a tax of 15% + Surcharge and Cess is being charged on the same. However, after successful completion of 1 year from the date of allotment all your gains are tax exempt under long term Capital gains.
Under Debt Funds or Hybrid Funds, where the share of equity is less than 65% the short term period is of 3 years. Any time before the completion of 3 years if you withdraw your investment amount then it is taxable according to your tax slab as short term capital gains.
Any period after the completion of 3 years of SIP from the date of allotment of units is considered as the period of Long term Capital Gains. Under this time, you’re charged 20% after indexation as per set by the government.