mutual fund investment

INVESTING IN MUTUAL FUNDS? HERE ARE 6 TIPS TO REMEMBER

October 26, 2021 by admin Leave a Comment

Are you new to the world of investing? Whether you are a new or an old investor, you must have surely stumbled across the investment term – mutual fund investments. Mutual funds are indeed one of the most sought-after investment options among several retail investors. This article focusses on providing certain tips to investors (new or old) to help them invest in mutual funds:

Tips to invest in mutual funds

Here are several tips that can help you in your journey of investing in mutual funds:

Understand the different types of mutual funds
As an investor, you can choose among different types of mutual funds. Mutual funds are bifurcated broadly on basis of their structure, investment goals and asset classes.

Types of mutual funds according to structure – open-ended mutual funds, close-ended mutual funds, interval funds
Types of mutual funds according to investment goals – growth funds, liquidity-based funds, fixed-maturity funds (FMF), capital preservation funds, tax-saving mutual funds (ELSS), pension funds
Types of mutual funds according to asset classes – debt funds, equity mutual funds, and hybrid or balanced funds, solution-oriented funds, other funds

Understand the benefits of mutual funds
When you invest in mutual funds, you enjoy all the benefits of mutual funds. Some of them are professional management by fund manager, diversified portfolio, power of compounding, potential to earn significant returns, high liquidity, and tax benefits.
Evaluate your risk profile
Risk profile refers to the ability of an individual to take risks in a hope to earn higher returns in the stock market. Usually, in mutual funds investment plans, a higher degree of risk is often rewarded with higher returns. Mutual funds are divided into 3 types based on the level of risk it possesses – high-risk mutual funds, moderate-risk mutual funds, and low-risk mutual funds.
Adopt the right asset allocation strategy
An asset allocation strategy can significantly impact the portfolio by minimizing the level or risks borne by the portfolio and maximizing the overall returns earned on the investment portfolio.
Choose the right type of funds for your portfolio
To ensure choosing mutual funds that have huge potential to generate significant returns, consider the following parameters before making your investment decision:

Associated risks
Expense ratio
Quality of the fund manager
Performance record
Quality of the fund manager
Asset management company (AMC)
Asset under management (AUM)

Tax on mutual funds
It’s important for an investor to understand the taxation on mutual funds to derive the true value of returns on their mutual fund investments. Mutual funds in India are subjected to two types of taxes:

Tax on dividends
Tax on capital gains

Depending on the type of mutual fund and their holding period, different rules are applicable for taxation on mutual funds.

Your decision to invest in mutual funds should be based on your needs. The mutual funds that you decide to invest in must align with your financial objectives, risk appetite, and investment horizon. You can also take the help of a mutual fund advisor or financial expert who can help you in choosing the right type of investments for your investment portfolio. Happy investing!

TOP REASONS OF WHY YOU SHOULD INVEST IN TAX SAVING MUTUAL FUND SIPS

June 24, 2021 by admin Leave a Comment

Investing in tax saving investmentsis often a priority for those investors who wish to benefit from the Section 80C tax deduction of up to Rs 1.5 lac per annum. There are several Section 80C investments that offer this tax deduction. Examples include Unit-LinkedInsurance Plan (ULIP, bank Fixed Deposits (FD), Post Office Monthly Income Scheme (POMIS), Public Provident Fund (PPF), National Pension System (NPS), Senior Citizens Savings Scheme (SCSS), Equity-Linked Savings Scheme (ELSS), etc. According to your investment objective, you can choose a scheme that best aligns with your portfolio. If your underlying aim to is to create wealth while saving on tax, you might consider investing in tax saving mutual funds – ELSS. Let’s analyse top few reasons why you must consider investing in ELSS.

What is ELSS?

ELSS schemes are equity-oriented schemes that invest the majority of their corpus, at least 80% of their assets in equity and equity-related investments. As ELSS mutual funds are one of the Section 80C investments, you can save up to Rs 46,800 per annum by investing in these tax saver mutual funds. These funds are believed to provide dual benefit of wealth creation and tax-saving attributes to investors.

ELSS funds have a lock-in period of three years. Just like any other type of mutual funds, you can invest in ELSS via SIP mode or lumpsum mode.

Why should you invest in tax saving mutual funds via SIP mode?

Systematic Investment Plan (SIP) helps investor to accumulate a significant amount by investing small, insignificant sums of money in a particular mutual fund scheme regularly for a pre-determined period of time. Let’s understand why you must consider investing in ELSS funds via SIP:

Flexibility to invest according to your needs

SIP investment offers a lot of flexibility to their investors. First, an investor has the option to invest in different types of SIP according to their investment needs – they can invest in top-up SIPs, vanilla SIP, perpetual SIP, and trigger SIP. The periodicity of the intervals can be daily, monthly, weekly, semi-quarterly, semi-annually, or annually, as per an investor’s needs.

Invest a small, insignificant amount

Investment in SIP does not require an investor to shell out a major portion of their earnings. An investor can invest a small, insignificant amount in SIP investments over a period of time to achieve their financial goals. An investor can invest in mutual funds via SIP an amount as low as Rs 100 per month.

Instils the habit of financial discipline

Investments in SIP requires investors to allocate money towards mutual fund units periodically over a specified period of time. This encourages the habit of regular saving and investing. Hence, SIP investments inculcate a sense of financial discipline among investors which is important to achieve your goals in a systematic manner.

Now that you have understood the reasons for investing in tax-saving mutual funds via SIP, what are you waiting for? Just bear in mind that when you choose to invest in ELSS via SIP, each SIP instalment would be considered as a new investment and have to complete the three years lock-in period individually. Happy investing!

WANT TO PARK A LUMP SUM AMOUNT FOR THE SHORT-TERM? KNOW THE INVESTMENT OPTIONS

March 12, 2021 by admin Leave a Comment

Usually investors invest in mutual funds to meet their long-term objectives. However, that may not always be the case. Mutual fund investments can also help you meet your short-term needs and goals. Investors invest for short duration either because their goals are near or they don’t wish to risk their capital by locking their capital for a long tenure. Although, there is no properly defined tenure for short-term investments, anything invested for a duration of 7 days to 1 year can be considered as short-term investments. But what are the investment options available to investors to park their lumpsum investment for a short duration. Read on to know about the several types of investments where you can park your money:

Bank fixed deposits (FDs)
Bank deposits are one of the safest and the most popular choice for parking your money for a short-term. These investment options are accompanied by various tenures ranging from 7 days, 14 days, 1 month, or even up to ten years. These deposits can also be renewed and re-invested on maturity.A typical FD offers returns around 6.5 to 7% p.a.
Liquid mutual funds
These are open-ended mutual funds that invest their capital in money market instruments such as commercial papers, certificate of deposit (CD), term deposits, treasury bills that have a maturity of up to 3 months, etc. These funds do not have any maturity period and extry/exit load. Thus, these mutual funds are highly liquid in nature. Redemptions from these funds can be processed within 1 working day.
Arbitrage funds
Arbitrage funds use futures and equity to create the equivalent of a debt securities. These funds generate returns by instantaneous buying and selling of securities, commodities, or currency in diverse markets at the same time. These funds also do instantaneous purchasing and sale of securities in both derivatives and cash markets in order to lock-in a particular amount of profit.
Short-term debt mutual funds
These funds are ideal for risk-averse investors with an investment horizon of 6 months to 12 months. Debt funds have the potential to generate higher returns than fixed bank deposits and is also more tax efficient than a bank FD. However, investors must note that these mutual funds are not immune to interest rate risk. But, they make up for it by offering higher returns than money market funds and FDs.
Money market funds
These are considered to be one of the lowest risk products among mutual funds. These funds typically invest in ultra-short government securities such as treasury bills, call money market, treasury bills, banks certificate of deposits etc that maturity of up to three months to twelve months. These funds are void of default risk. However, they carry a very insignificant amount of interest rate risk.

You can also use a mutual fund lumpsum calculator to understand the future value of investments. Happy investing!