Mutual Fund Introduction

Mutual Fund Introduction

Mutual Funds are collective investments which pools the money of several investors and invests this in stocks, short-term money market instruments (including government securities), bonds and other securities.The Mutual Funds in India are handled by Fund Managers, also called portfolio managers. The Securities Exchange Board of India (SEBI) regulates the Mutual Funds in India. The unit value of the Mutual Funds is known as net asset value (NAV). The NAV is calculated by the AMC (Asset Management Company) at the end of every business day.

Benefits of Investing in Mutual Funds:

Mutual funds have gained popularity among the investing public especially in the last two decades. Following are some of the primary benefits of investing in mutual funds:

A. Tax Benefits on Investment in Mutual Fund

1. Dividends: 100% tax free in case of equity oriented funds.

2. Equity Funds: Short term capital gain (STCG) tax rate is 15% and Long term capital gain (LTCG) is exempt (more than 365 days)

3. Debt Funds: STCG (less than three years) is taxed according to slab and LTCG is lower of 10%(without indexation) and 20%(with indexation) 

B. Other Benefit of Investing in Mutual Fund

1. Professional Financial Management
Every Mutual Fund scheme has a well-defined objective and behind every scheme, there is a dedicated team of financial experts working with specialized investment research team. These experts monitor market and economic trends and analyse securities diligently and judiciously, their products and performance, and after thorough analysis decide on the best investment option most aptly suited to achieve the scheme’s objective as well as investor’s financial goals.

2. Diversification of Risk
It plays a vital role in the success of any portfolio. Diversification across investment is another way to reduce the risk of your portfolio and higher expected return from your investment. Mutual funds invest in a broad range of securities. This limits investment risk by reducing the effect of a possible decline in the value of any one security. Mutual fund unit-holders can benefit from diversification techniques usually available only to investors wealthy enough to buy significant positions in a wide variety of securities.

3. Affordability
Mutual Funds generally provide an opportunity to invest with fewer funds as compared to other avenues in the capital market. You can invest in a mutual fund with as little as Rs. 5,000 and also have the option of investing a little of Rs.500 every month in SIP (Systematic Investment Plan).

4. Liquidity
You can cash your money from a mutual fund on immediate basis when compared with other forms of savings like the Public Provident Fund or National Savings Scheme etc.. Further you can also do partial withdrawal which is not possible in any other class of asset. 

5. Variety of Investmen
There is no shortage of variety when investing in mutual funds. There are funds which focus on large cap stock or mid cap stocks and small cap stocks or mix of stocks and bonds and with due assistance from a financial expert, the investor can choose a scheme that aptly fit their requirements, and help them to achieve maximum return on investment.

Make Most of Your Investments with Equity Mutual Funds

  • ELSS (Equity Linked Savings Scheme)
ELSS - an oppotunity to save tax u/s 80C and create wealth
Long-term capital gains are tax free
Short lock in period of 3 years.
Invest systemetically through SIPs to bring discipline to your tax planning.
  • Large Cap / Blue Chip Funds
Invest in reputable and findncially sound large cap companies
Aim to strengthen and provide stability to your equity portfolio
Provide sustainable returns over a longer period of time

  • Mid and Small - Cap
Invest in mid-sized and small companies
Can potentially take better advantage of a reviving economy
Short- term investments may be subject to volatility, hence it is suitable for people with a high risk- high return profile.
  • Diversified Equity Funds
Allocate investments across sectors, thereby minimising risk
Aims to provide long term growth
Suitable for investors with a moderate risk profile
  • Dividend Yeild Funds
They invest in companies, which can provide returns consistently
Provides capital appreciation to the portfolio
Relatively less volatile compared to other equity funds.
  • Equity Index Funds
Invests in stocks in the same proportion as they are in the index
Low expense ratio
Sensitive to market risks
  • Sectoral Funds
Invest in a particular sector or industry such as Pharmaceutical, FMCG (Fast Moving Consumer Goods) and IT (Information Technology)
Performance of the funds is dependent on the sector being invested in 
Diversification is low so they carry a high sector specific risk.
  • Contra Funds 
Invests in stocks that are undervalued but have growth potential in the long run.
Invest during low stock values and benefit when the market potential of the stocks is recognized
Gain predominantly from long term investments.

Do Contact Us for more details.

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