Union Budget 2020 has come up as a sense of relief for the middle class with income up to 5 lakh but at the same time, there is a hidden shock for investors. Now Mutual fund returns will be also liable to income tax if the returns exceed the amount of Rs. 5,000. The budget 2020 plans to insert Sec. 19K in Clause 80 of Income-tax. 10% income tax on mutual fund returns will be applied to the income generated from the MFs.The move is initiated to keep Mutual Funds at par with bank fixed deposits. According to the experts, the movement will be treated as a negative aspect as the investors will be left with very little cash in hand.
Mutual funds India is known to be a great way of investment. If you want to know about mutual funds, then this is the right place for you. In the forthcoming paragraphs, we will talk about mutual funds investment, types, and other things about it. So lets us get started:
All You Need to Know About Mutual Funds:
What is Mutual Fund?Â
Mutual Fund (MF) are formed from the capital collected from the investors, which is used to invest in stocks, shares, and bonds on any organization. A professionally qualified mutual fund manager manages the funds so that they can earn returns as much as possible. Mutual funds are not only for India; but for all over the world. Investors invest in mutual funds to grow their wealth. The fund manager with the expertise in this helps an individual to make the right decisions related to investing in the mutual funds. The funds are registered with the Securities Exchange and the Board of India (SEBI) which makes the mutual investments completely safe. Â
Types of Mutual Funds:
Equity Funds:
The equity mutual funds are invested in the shares of different companies. When the shares price increases it automatically increases the chances to earn extra profit from the equity fund investment. When the share prices fall, it leads to a loss for the investors. If an individual invests in equity shares, it is for those who want to get involved in such investment for long.
Debt Mutual Funds:
The debt funds are invested on the permanent fixed income on government securities. You can take the example of bonds and treasury bills. As compared to equity share investment, the debt shares are less risky. Debt mutual funds are for those who are looking for short term investment.
Balanced or Hybrid Funds
Balanced or Hybrid funds are for both equity and debt one to lower down the risk of loss, and maintain the profit levels from the investment. The fund manager is responsible for deciding the ratio to find the right result for the investor.
Why Choose Mutual Funds?
Expert Money ManagementÂ
The companies of the mutual fund have fund managers, who help in making selection of the shares, sectors, and debt papers. In this, the investment is made according to the pooled mutual funds. The decisions are made according to the investor’s interest.
Lock-in Period
The lock-in period is the time in which the investors cannot withdraw their mutual funds. In the lock-in period, the investors cannot sell their mutual funds also. Usually, the open-ended funds do not have any fixed period of the lock-in period. But, in the case of tax-saving funds, the lock-in period is 3 years.
Low CostÂ
Mutual Funds are a very affordable funding option. For those investors who are looking for small-term investments, the mutual fund’s options are best to choose. There is a small amount paid for the expense ratio. The range is between 0.5 to 1.5%. As per the norms of SEBI, the expense factor cannot be exceeded by 2.5%.Â
SIP Option
If you do not have any lump sum to invest, the Systematic Investment Plan (SIP) is the right platform to invest. SIP gives the liberty of investing in small amounts, even Rs. 500 per month which is best for the investors with an intention to make small investments. Â
Flexibility to Switch Funds
To stay in the market, the investors know well, when they need to switch their funds. Various mutual funds schemes are available, which allows investors to switch their funds. Due to the volatility of the market, there is a fund manager, who keeps an eye on the market to ensure that the investors get the best returns.
Investments made Based on Goals, and Focus Sector
All the investors invest in mutual funds, which helps the investors to attain a goal. There are many kinds of funds with different risk factors available, which helps in achieving the goals for the investors.
DiversificationÂ
The mutual funds invest in various assets in the company used to share a few risk factors. When one class gains profit from another class, it helps in gaining profit. It is advice for the investors to not invest in too many funds; otherwise; it will be difficult for the person to manage the task.
Flexible TenureÂ
Equity Linked Saving Scheme (ELSS) is the scheme, in which the funds come with a lock-in period of three years. It helps the investors to get enough flexibility to attain the best profits from their mutual funds. It does not matter; whether it is short term or long term mutual funds, it will be better to attain profits in both cases. The time frame helps the investors to think over their mutual funds, and how to invest in mutual funds.
LiquidityÂ
When the investors invest in the best mutual funds, it brings liquidity. The investor can withdraw their funds anytime when they want. There is no need to justify the requirements to withdraw your mutual funds or look for any buyer. At the fund house, the investor just needs to place a request to withdraw their amount. The amount will be received by the investor within 3 to 7 days.
Handpicked Funds
Based on the mutual fund’s investment goals, there are different types of mutual funds that are available. It is based on goals, sectors, risks, and other factors. Due to so many options available, it is hard for the investor to decide which one will be proven right for them. It is challenging for the investor to come to one mutual fund. Â
Ease of Trading and Transaction ExperienceÂ
When it comes to selling, buying, and redemption of mutual funds, it is quite easy. It is just that, you have to request the mutual house and the manager of the fund to manage the MF, and take care of it. If any individual is stuck in an emergency, then with the help of the liquidity nature, the investor can withdraw or redeem their amount.
Tax Saving Mutual Funds
ELSS’s investments provide two benefits to the investors. First, they help at tax deduction, and second, they provide wealth accumulation. The ELSS’s investment is able for the deduction of tax. It is made under section 80c, in the Income Tax Act, 1961. The deduction can be made around Rs. 150000 per year.
Investment SafetyÂ
All the mutual fund houses are under Securities and Exchange Board of India(SEBI), and the association of mutual funds in India (AMFI). These AMFI and SEBI are part of the government, which helps in protecting the investment of the investors.
When to Invest?
Different factors to consider, when you are going to spend are:
- Market ConditionÂ
- Availability of the FundsÂ
- Expected ReturnsÂ
- Investment DurationÂ
If an investor wants to invest, SIP will be the best option to choose.Â
How to Invest in Mutual Funds?
Direct Investment
Approach to the nearest branch of the fund house, and take the application form from there to invest in mutual funds. Go to the web with the application, and make sure the print should be clear enough to be understood by anyone.
Agents
The agents are the sales professionals, who reach to the customers to let them know about various kinds of fund options. The agents help deal with all the processes related to mutual funds, such as transaction, redemption, process, and cancellation.
The Online Fund House, and Distributors
Selling and making the purchase of mutual funds online nowadays is very common. You can save time and effort by choosing the online platform. The top fund houses can be found on the online portals, so one can choose the suitable option easily. The best part is, the entire process of mutual funds will not take much time at all. It will be done within 10 minutes around.Â
Document Required for Mutual Fund Investment:
Identity Proof
- PAN Card
- Passport
- Aadhaar Card
- Driving License
- Voter ID
Address Proof:
- Unique Identification Number
- Passport
- Driving License
- Ration Card
- Voter ID Card
- Utility Bills (Gas bill, electricity bill, etc.)
- Bank Account Statement
