A mutual fund is a type of investment vehicle consisting of a portfolio of stocks, bonds or other asset classes. Mutual funds give small or individual investors access to diversified, professionally managed portfolios at a low price. Mutual funds are divided into several kinds of categories, representing the kinds of securities they invest in, their investment objectives, and the type of returns they seek.
Facts that you must know before investing in mutual fund:
1. Mutual Fund is not necessarily all about equity or stocks. Mutual funds also deal into debt instruments like Certificate of Deposits (CDs), Bonds, Govt. Securities (G-Sec.), Non-convertible Debentures (NCDs) etc. This means that a mutual fund scheme can also have all or some of these debt instruments in its portfolio. MF schemes that are having debt papers of very small duration are least risky. Similarly, carefully chosen debt MF schemes can be as safe as fixed deposits along with better tax-adjusted return. Contact MF Distributor and start investing in equity, debt, hybrid or multi asset allocation schemes as per your need and investment horizon.
2. Starting your investment in Mutual Fund is easy. All you need is to be KYC compliant and have an active bank account. That’s it. You can invest completely online and paperlessly through our client portal - no demat account needed.
3. Investment in Mutual Fund can be made in lump sum or systematically.
a. Through Systematic Investment Plans ( SIP ) you can invest a fixed amount at regular intervals for any number of years. This way your investments will reap the benefit of rupee cost averaging i.e. buying more units when price is low and buying lesser units when price is high.
b. If you need regular withdrawals from your Mutual Fund investment, then Systematic Withdrawal Plan ( SWP ) is the best option. Here a fixed amount (set by you) will be automatically withdrawn for pre-set number of years. Depending on the fund available and withdrawal amount, this will continue.
c. If you are concerned about short term volatility while making a lump sum investment, then go for Systematic Transfer Plan ( STP ). Here, the lump sum money will be first invested in a liquid scheme (low risk debt fund) and then from there, a fixed amount will be transferred to a chosen equity scheme of the same fund house. This way, exposure in equity scheme will be made on a staggered basis and hence risk is minimized in case of volatile market movements.
4. How are your Mutual Fund investments taxed? If in portfolio of a MF scheme, percentage of exposure into equity type of instruments is more than or equal to 65%, then such schemes are known as equity schemes, otherwise those would be considered as debt schemes for taxation purpose. Equity schemes and debt schemes are taxed differently. Taxing also depends on how long you hold the investment before you sell. If you sell equity fund units within 12 months, the short-term capital gain (STCG) is taxed at 20%. If you hold for more than 12 months, the long-term capital gain (LTCG) above ₹1.25 lakh per year is taxed at 12.5%. For debt mutual funds (where equity exposure is below 65%), all capital gains-regardless of how long you hold - are now added to your total income and taxed at your applicable income tax slab rate.
Disclaimer : Mutual fund investments are subject to market risks. Please read all scheme - related documents carefully before investing. Past performance is not indicative of future returns. The information on this page is for educational purposes only and does not constitute investment advice.
