Know why people opt for mutual fund investments

by admin | June 29, 2018 8:58 am

There are many reasons why people opt for mutual funds investment. We will discuss today some of these very important reasons –

Liquid funds – investment needs of few days to a few months

Short term funds – investment needs of few months to few years

Income Funds and hybrid funds – investment need of 3 years and above

Equity and balanced Funds – for long term investment needs of 4-5 years and above

ELSS Funds – for savings taxes under Section 80C of the Income Tax Act 1961

Following could be some suggested category of funds based on risk profile –

Low risk – Liquid funds

Moderately low risk – Ultra Short-Term Funds and Short Term Funds

Moderate risk – Income Fund and Hybrid Debt Funds

Moderately high risk – Equity Savings Funds, Balanced Funds and Large Cap Funds

High risk – Diversified Equity Funds, Mid and Small Cap Fund and Sector or Thematic Fund

Mutual Fund systematic investment plan offers a convenient mechanism of investing small amounts of money every month to build a corpus for your future financial needs.

On the other hand non-equity mutual funds, enjoys significant tax advantages compared to fixed income products. Long term (investments held for more than 36 months) capital gains from non-equity mutual funds are taxed at 20% after applying indexation. Short term (investments held for less than 36 months) capital gains are added to the income of the investor and taxed at the tax rate applicable to the investor.

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