What is a mutual fund? Was the question about 25 years ago, when mutual funds were initially introduced. Since then, the investor psychology concerning mutual funds has improved drastically. Ever since they have been created, Mutual Funds have been an increasingly popular form of investment for a host of investors. They are simple, and provide other great attributes for investors who are time-tied or just have very limited knowledge or money. Let’s evaluate why mutual fund investments have become the biggest trend these days.
Major advantages of investing in mutual funds
Advantage #1:
Mutual fund investments are more or less stress-free: Investments are always surrounded by a degree of uncertainty. An investor is scared of investing due to lack of adequate knowledge & time, self-discipline, or investing experience. Mutual funds fit in perfectly in this situation as they have an inherent design to tap professional expertise to manage investments which, in turn, relive the stress of the investor.
Advantage #2: Mutual funds offer diversification: Diversification of assets is a rule for both large and small businesses. This is done so that an unexpected loss by a collapsing stock will have a minor effect on the rest of the portfolio. Without a m
utual fund, the investor will invest their little chunk of investment in one or two stocks thus exposing oneself to a higher amount of risk.
Advantage #3: Mutual funds offer tax benefits: Mutual fund investments which are held for long term (12 months or more) qualify for capital gains 7 are taxed accordingly. Mutual funds also have a benefit of indexation.
Advantage #4: Mutual funds have liquidity: In
open-ended mutual funds, an investor has an option of redeeming all or a part of their investment at any given time to get the current value of the stocks held. This process is standardized which makes this procedure efficient & fairly quick, so that the investor can get their money as soon as possible.
Advantage #5: Mutual funds are transparent: The performance of a mutual fund is reviewed regularly by several agencies, publications & professionals. This makes it easier for an investor to compare different funds to each other. As an investor in the fund, one is provided with regular updates like monthly account statements, monthly and half yearly portfolio disclosure etc.,
|
Capital Gains |
| From April 01, 2014 to July 10, 2014 |
|
Short Term Capital Gains (Units held for not more than 12 months)5 |
Long term Capital Gains (Units held for more than 12 months)5 |
| Equity schemes | Debt schemes (including Infrastructure Debt Funds)4 | Equity schemes | Debt Schemes (including Infrastructure Debt Funds)4 |
| Resident Individuals/HUF/ AOP/BOI | 15% | As per slab rates | Nil | 10% / 20% with indexation |
| Domestic Companies/Firms | 15% | 30% | Nil | 10%/ 20% with indexation |
| NRIs | 15% | As per slab rates | Nil | Listed Units- 10%/ 20% with indexation Unlisted Units- 10% without indexation7 |
| FPIs | 15% | 30% | Nil | 10% without indexation |
| From July 11, 2014 to March 31, 2015 |
|
Short Term Capital Gains (Units held for not more than 36 months)5 |
Long term Capital Gains (Units held for more than 36 months)5 |
| Equity schemes | Debt schemes (including Infrastructure Debt Funds)4 | Equity schemes | Debt Schemes (including Infrastructure Debt Funds)4 |
| Resident Individuals/HUF/ AOP/BOI | 15% | As per slab rates | Nil | 20% with indexation |
| Domestic Companies/Firms | 15% | 30% | Nil | 20% with indexation |
| NRIs | 15% | As per slab rates | Nil | Listed Units - 20% with indexation Unlisted Units - 10% without indexation7 |
| FPIs | 15% | 30% | Nil | 10% without indexation |
Disclaimers
The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. Certain factual and statistical information (historical as well as projected) pertaining to Industry and markets have been obtained from independent third-party sources, which are deemed to be reliable. It may be noted that since NAM INDIA (Formerly known as Reliance Nippon Life Asset Management Limited) has not independently verified the accuracy or authenticity of such information or data, or for that matter the reasonableness of the assumptions upon which such data and information has been processed or arrived at; NAM INDIA (Formerly known as Reliance Nippon Life Asset Management Limited) does not in any manner assures the accuracy or authenticity of such data and information. Some of the statements & assertions contained in these materials may reflect NAM INDIA’s (Formerly known as Reliance Nippon Life Asset Management Limited)views or opinions, which in turn may have been formed on the basis of such data or information.
Before making any investments, the readers are advised to seek independent professional advice, verify the contents in order to arrive at an informed investment decision. None of the Sponsor, the Investment Manager, the Trustee, their respective directors, employees, affiliates or representatives shall be liable in any way for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including on account of lost profits arising from the information contained in this material.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
