Mutual Fund SIP Invest670 views
Are you suffering from procrastination or freezing with the indecision as far as your investments are concerned? Well, if yes, here comes a solution that will help you to overcome from this hindrance. Let’s try to understand this thing with the below mentioned example-
For example- if you have invested in 20 or 40 stocks, will you be able to get enough time to track the company in which you have invested? Well, for that, you need to keep a close tab on such companies in order to know them in terms of performance, operations, future plans and so on. Moreover, when it comes to debt market, it would not be wrong to say that you have to be on your toes to know about the inflation as well as interest rates, not only for the domestic market, but for international markets as well.
More to the point, there is no denying of the fact that when it comes to investing in debt and equities, there is not only one, but in fact many resources like time, skills and expertise act as key constraints. Thus, there is only one simple solution to this issue and i.e. to go ahead with the mutual funds. Now, lets’ try to understand what advantages do you get while you invest in mutual funds.
- Well Regulated and Transparent
The mutual fund industry works on a three-tiered structure i.e. trustees, sponsors and AMC, whose main endeavor is to make sure that your money is in safe hands. Moreover, the trustees are the ones who set the broader guidelines for the fund managers. Furthermore, these guidelines help in preventing the AMC from undertaking any sort of mis-adventure with your money. For example- as a part of reduction and risk management, these fund managers are not supposed to invest in single penny stocks.
- Investment Varieties
Mutual funds come with a variety of choices for the investors to invest. The options are equity funds, debt funds, balanced funds, gold funds, exchange traded funds (ETFs) and so on.
- Choices on Receiving Income/Profits
Well, with mutual funds come the option of receiving the dividends, reinvesting the dividend or last but not the least accumulating the dividend in the scheme. So, whenever you need the cash, you should go for the dividend option. If you are interested in growing your investment, go with the dividend reinvestment option. Here, the declared dividends are reinvested at the current value. More to the point, in the growth option, no dividend will be declared, hence the value of your existing units will increase.
- Professional Money Management Services
The mutual funds are operated by professional managers with years of expertise in many areas such as research, operational aspects of market, investment, economy and many more. With such expertise, skills and knowledge, these professional managers provide you with the best of management services and help you make informed decisions.
- Affordable Investment
With mutual funds, you get professional money management services at an affordable price. The investors of mutual funds collectively bear the fees of management, being payable to the AMC. Hence, the per unit cost of management is very low.
- Diversification with Small Values
One of the biggest advantages in mutual funds is the fact that retail investors can freely invest the sum say as modest as Rs.1000 0r Rs. 5000. Furthermore, as the mutual funds invest in a basket of stocks, hence diversification can easily be achieved which in other case seems impossible.
- Minimum Paperwork
As mutual funds involve minimum paperwork, you can easily invest there. You just need to fill in the application form, make a cheque for your investment amount. Also, you need to submit your identity and address proofs to the AMC. You can either directly invest in mutual funds or you can take the help from distributors or advisors.
- Tax Benefits
The equity linked savings schemes (ELSS) , which invest in equity, provide income tax benefits under the section 80C of the Income Tax Act, 1961. Moreover, dividend distributed on mutual fund investments is basically tax free in the hands of investors.
However, if you are someone who is investing in the equity for the very first time, you can go for RGESS (Rajiv Ghandhi Equity Savings Scheme), wherein you can get the tax deduction under 80CCG section. Well, the maximum investment under this scheme is Rs. 50,000 on which you get 50% tax deduction i.e. if you invest Rs. 50,000, your reduced tax burden will be Rs. 25,000.
- Investment Strategies
You can also invest in mutual funds on a regular basis through SIP (systematic investment plan), which further helps to average out your cost of acquisition. Additionally, you can also invest in the STP(Systematic Transfer Plan), wherein you can easily invest the lump sum amount in just single scheme and regularly transfer this pre-defined amount into another scheme. However, the transfer is generally made from the debt scheme to an equity scheme so as to use the SIP route to equity investing.