Why You must include Mutual Funds in your portfolio?

Benefits of mutual funds?

  • Buy n Sell with Great Convenience: Investors who have the time and the money can build their portfolio by buying one security at a time. But identifying, researching and monitoring securities can be a full-time job that requires a lot of commitment. Alternatively, 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.

  • Do not Put all Eggs in One Basket, Be Diversified: A single fund can hold securities from 100s of different issuers or companies, far more than what an individual investor can realistically manage to hold in their individual portfolios. This diversification reduces the risk of a loss due to problems in one particular company or industry.

  • Mind your Own Business, let it manage by Professionals: A mutual fund is managed by professional investors who do this full time. The resources available to them like traders who have practical experience in when to buy and sell securities, research team and access to company management is far more than what an individual investors can achieve on his own.

  • Get Your Money When You Want, It’s Liquid: Like shares, mutual funds are also liquid investments that can be bought or sold freely so that investors have access to their money when needed. However, certain shares might not trade freely because there is not market for them, and then the investor is stuck. Mutual funds do not face this problem of illiquidity.

Role of funds in a consumer's portfolio

  • Hedge against Inflation & Get Growth also: Traditional savings instruments cannot keep pace with inflation and the rising cost of living. They give only 3.5% in a savings account. You can use a mixture of mutual funds to achieve a better return than what you can get in a savings account

  • One more Source of Earning: Can provide you with income if you invest in an income or dividend paying fund, along with giving you a modest capital appreciation

  • 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.

Life insurance on the other hand is not an insurance product, but rather a protection product that will compensate your family or survivors in case something happens to you.

There are some types of life insurance that have an investment feature attached to them. Please understand that such type of hybrids can be recreated by you by simply combining a pure life insurance product along with a mutual fund. And, you will pay lesser in fees if you do this on your own, because these hybrids have much higher fees.

These hybrids have a purpose in your portfolio if you are looking for some capital appreciation along with life/risk cover. Ultimately, you need to decide what your needs are and whether the product you are looking at meets your needs or not.

Selecting The Right Mutual Fund

There are over 750 different mutual funds in India today and about 35 different companies that run these funds. So, how will you choose which fund to invest in?

Firstly, 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 in your office cafeteria 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 son's education in 2 years time, then you should consider a conservative fund like a bond or money market fund, which will also give you some income

Secondly, this brings us to time horizon. What period are you ready to invest in the market for? Equity funds should be held for at least 3-5 years because equities are long-term investment vehicles. Debt or money market funds, however, can be invested in for shorter periods of time.

Thirdly, how comfortable are you with thepromoter of the fund? Many new companies are starting fund houses. Many of them will not be as successful as the ones that already have a successful track record that they have built over the past 5-10 years. So, invest in mutual funds that have been launched by companies that have a track record and are not new into the Indian market.

Finally, many investors look at past performance and assume that the fund will continue to return the same in the future. This is not always true and can often be wrong. Any fund can do well over a short-term because luck and other factors can come into play. So, do not choose a fund to invest in just because it has done well in the recent past. You should be interested in the long term performance of the fund. Invest in funds that have done well across market cycles and investment cycles.

Mutual Funds and Taxes

Different types of Mutual Funds attract different types of 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 indexation or 20% with indexation

Less of 10% without indexation or 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, ELSS. However, the minimum term for these schemes is 3 years and you cannot withdraw your money before that time

*The education cess of 3% shall be levied on all investors.

*Short Term Capital Gain Tax indicated above is inclusive of education cess

**Dividend Distribution Taxes indicated above are inclusive of additional surcharge and cess.

Buy MF Online
Send Greeting Cards
SIP-O-METER
Financial Calculators
Downloads
LIC NAV
Child Education Planning

Wealth Investor Login

Username
Password
Forgot Password ?
Schedule a meeting with us
Name
City
E-mail
Mobile
Message
 

With positive net flows into equity schemes for six months in a row, stocks of 3 listed AMCs and CAMS remain in focus
Thu, 09 Sep 2021 12:55:28 +0530


With the ebbing of the virus risk and equity markets scaling new highs, investors poured in Rs 20,742 crore in equity schemes in July — more than a four-fold rise over June
Thu, 12 Aug 2021 12:02:42 +0530


Ashoka India Equity Investment Trust Plc received 10 lakh equity shares while Abakkus Emerging Opportunities Fund - 1 purchased over 6.65 lakh equity shares, which already held a 1.01 percent stake in the company.
Mon, 20 Sep 2021 22:42:46 +0530


Mon, 20 Sep 2021 22:42:46 +0530


Ashoka India Equity Investment Trust Plc received 10 lakh equity shares while Abakkus Emerging Opportunities Fund - 1 purchased over 6.65 lakh equity shares, which already held a 1.01 percent stake in the company.
Mon, 20 Sep 2021 22:42:46 +0530


The trading in shares of Markolines will commence from September 28, the prospectus says
Mon, 20 Sep 2021 16:41:50 +0530


Hem Securities has come out with its report on Paras Defence and Space Technologies. The research firm has recommended to #39;#39;Subscribe#39;#39; the ipo in its research report as on September 20, 2021.
Mon, 20 Sep 2021 14:38:06 +0530


Shares of the manufacturer of defence and space engineering products and solutions are expected to start trading on October 1.
Mon, 20 Sep 2021 12:39:52 +0530


Choice Equity Broking has come out with its report on Paras Defence and Space Technologies. The research firm has recommended to #39;#39;Subscribe#39;#39; the ipo in its research report as on September 17, 2021.
Mon, 20 Sep 2021 09:54:13 +0530


Choice Equity Broking has come out with its report on Paras Defence and Space Technologies. The research firm has recommended to #39;#39;Subscribe#39;#39; the ipo in its research report as on September 17, 2021.
Mon, 20 Sep 2021 09:54:13 +0530


Paras Defence IPO: Half of the offer size has been reserved for qualified institutional buyers, 35 percent for retail investors and the rest 15 percent for non-institutional investors.
Thu, 16 Sep 2021 13:26:38 +0530


Sansera Engineering IPO: The manufacturer and supplier of precision forged and machined components and assemblies aims to raise Rs 1,283 crore through its public issue which is a complete offer for sale by investors and promoters.
Thu, 16 Sep 2021 11:45:49 +0530


Markolines Traffic Controls IPO: The company plans to use the net fresh issue proceeds for repaying debts, working capital requirements, and general corporate purposes
Wed, 15 Sep 2021 14:14:39 +0530


Paras Defence had raised Rs 34.402 crore through a pre-IPO placement of 25,52,598 equity shares.
Wed, 15 Sep 2021 13:43:22 +0530


Sansera Engineering IPO: Investors have put in bids for 78.85 lakh shares against the IPO size of 1.21 crore shares
Wed, 15 Sep 2021 11:27:43 +0530


In traded volume terms, 15.49 lakh shares of the company were traded at the BSE and over 2.21 crore units at the NSE during the day.
Tue, 14 Sep 2021 18:46:15 +0530


In traded volume terms, 19.46 lakh shares were traded at the BSE and over 1.12 crore shares at the NSE during the day.
Tue, 14 Sep 2021 17:49:08 +0530