Why to Invest in Mutual Funds
Mutual Funds are a great investment option if you want to invest but not sure about which instruments to put it in as it combines the value of equity/ stocks but without the inherent risk associated with it. They are diversified into stocks, bonds, money markets and other securities to get the maximum return, reduce risk and save taxes. So it is a winner all the way!!
Salient Features:
· Each Mutual Fund has a stated objective – either growth, balanced or sector.
· NAV is the value of a single unit of the fund and changes from day-to-day.
· They are managed by an Asset Management Company (AMC), such as ICICI Prudential, Reliance, SBI, etc.
. AMCs hire a professional money manager, who buys and sells securities in line with the fund’s objective
· SEBI requires the fund objectives to be stated clearly in the prospectus.
Advantages of Mutual Funds
- Professional Money Management
- Liquidity – Encash your funds on any day within 3 to 5 working days
- Convenience – Most funds allow you periodic purchase plans, automatic withdrawal plans and automatic reinvestment of interest and dividends.
- Reasonable -Start with an initial investment of as low as Rs 500.
- Flexibility & Variety – You can pick blue-chip, sectoral funds, or funds with modest or high growth funds.
- Diversification – Reduce risk by having investments across assets & sectors
Tax benefits –
1. 100% Income Tax exemption on all Mutual Fund dividends
2. Open-end funds with equity exposure of more than 50% are exempt from the payment of dividend tax for a period of 3 years
