Mutual Fund Insights You Wish You Knew Sooner

Sakshi and Shreya are besties and discuss movies, fitness goals, life and everything in between. Sakshi was surprised to know that Shreya’s portfolio had grown phenomenally. Although they both started their investment journeys together, Shreya cannot stop talking about how her portfolio is growing beyond expectations. She told Sakshi that, like all other things, there are mutual fund investing hacks. These hacks help investors get more from an average-performing portfolio. Sakshi wanted to know everything about these hacks and how she could implement them.

Systematic Investment Plan Top-Ups: Growing Investments Over Time

Shreya shared that the first hack that helped her immensely was the SIP top-ups. SIP is a fixed sum, and more often than not, we tend to keep it fixed even though we can save a little more. Sakshi asked if this meant adding to the existing SIP whenever she had funds. How would that help? Shreya explained that top-up SIP meant that the amount of SIP increased at regular intervals. So, say you are investing Rs. 20000 per month now. After one year, you will invest Rs. 25000 per month. For example, she has instructed top-up SIP on some mutual funds; every year, the SIP amount for these ​mutual funds increases by 10%. She has researched these mutual funds and analysed their performance, and she believes investing more in them will be beneficial. Shreya said her appraisal cycle is calendar year, and by April every year, she will be entitled to a revised increased salary. So, every year, in April, her SIP amount also increases, which means she is now accustomed to saving her increment amount. And this gives her portfolio a great push and can help combat inflation.

Direct Plans: Saving on Costs for potential Returns

Sakshi was impressed by the top-up SIP secret and wanted to learn more. Shreya told her another change she has made is - taking the time to understand mutual fund investing. She has understood the costs involved and how to avoid them. For example, the exit load can be avoided by withdrawing at maturity. She also analyses the expense ratio and understands its impact on her returns. She has also saved money on intermediaries by opting for direct plans in mutual funds. These savings further add to her ability to invest and boost her portfolio.

Switching Funds Strategically

Shreya continued that most of us mistake mutual fund investing for a one-time activity. We assume that since we have started right, we need not worry. But that's not true. Mutual fund investing is dynamic, it must adapt to your life. Shreya reminded Sakshi of the time she needed funds for her mom’s surgery and how she panicked. She suggested switching funds then, but Sakshi was too busy to grasp the concept. She withdrew the funds she needed even before the hospital bills were issued. Shreya said during such times, you may consider switching from equity to debt for keeping provision for the tall hospital bills. In this way, you do not lose the benefits entirely. Also, sometimes, your financial goals need aggressive investing, and it is wise to switch gears while being mindful of the capital gain taxes on these movements. She explained that it's like playing a game where a certain sequence may give you better results.

Lesser-Known Tax Benefits

Now Shreya asked Sakshi to guess the most important hack for all salaried employees. Sakshi immediately responded - Tax Saving. They both smiled, knowing exactly how taxes feel on their pay slips. So Shreya said some mutual funds offer good tax-saving options, which is definitely the most needed hack. She explained that investing in mutual funds may not only help to save taxes but also may increases savings and adds to the portfolio’s growth. Investing in these mutual funds can be claimed under Section 80 C of the Income Tax Act, 1961, which will reduce the investor's taxable income.

Conclusion: Smarter Strategies for Better Results

Sakshi is motivated to try everything Shreya shared. Hacks make life simpler; they make people outdo others. Incorporating each of these hacks over a period of time will give you the edge your portfolio needs. Just like the saying goes, do not work hard; work smart. In the same way, do not invest hard; invest smartly. The smarter the investing strategies, the better the results and faster the progression towards the financial goals. Mutual fund benefits, like diversification, professional management, and tax savings, make them one of the viable options for smart investing.