Benefits of investing in mutual funds

1) Professional expertise

When you invest during a open-end fund , knowledgeable fund manager handles your investments. A team of researchers who track the market on a real-time basis supports every fund manager. supported their inputs, fund managers make necessary changes to your open-end fund portfolio to maximise returns. this feature can become an appropriate option for salaried people (and business owners) who don't have the time to trace markets or make timely investments.

2) Convenience

Investing in mutual funds are often a hassle-free and easy exercise. the whole process is paperless, and you'll complete it from the comfort of your home. And once you start your investment journey, you'll follow your holdings and make necessary adjustments, if needed, through your computer or smartphone.

3) Begin with small investments

Many people assume you'll only invest in mutual funds if you've got an outsized sum of cash . actually , you'll begin investing with just Rs. 500 per month. a scientific Investment Plan (SIP) can assist you invest small amounts regularly. And if your income rises over time, you'll also increase your SIP allocation. This way, you not only lower your investment costs but also enjoy the facility of compounding.

4) Diversification

Diversifying your portfolio is significant if you're looking to attenuate your exposure to risk and loss. An adequately diversified portfolio can weather the poor performance of one stock or sector, thus cushioning your total investments. Mutual funds are designed during a thanks to provide adequate diversification.

For instance, a open-end fund that tracks the S&P BSE 100 index could open your investment to as many as 100 securities during a single fund. this will be an easy and cost-effective way of diversifying your portfolio.

5) Tax benefits

Section 80C of the tax Act provides tax deductions on investments made in specific financial instruments. This includes mutual funds too.

Currently, you'll claim a tax break of up to Rs. 1.5 lakh per annum in Equity Linked Saving Scheme (ELSS) that provide one among the shortest lock-in period. These reasons make ELSS funds a well-liked tax-saving option among investors.

Growth investing

There are two ways  one can invest money: the conservative way and the aggressive way. The first consists mainly of investing in fixed income  instruments (debt securities) as there is less risk of losing capital. The downside, however, is that yields may or may not  beat inflation. On the other hand, the aggressive way is to invest in equity-oriented securities that have the potential  not only to beat inflation, but also to generate higher long-term returns. However, the shares haveMore short-term loss of capital.The conservative way is thus to invest in fixed income securities or debt mutual funds where the riskof capital loss is lower.

Within fixed income securities, one may look at traditional assured returns products or market linked products.The former include bank fixed deposits, government or post office savings like National Savings Certificates or Public Provident Fund, while the latter include tradable bonds and debt mutual funds.The latter do not provide any assurance on returns but are more liFixed income products are also suitable for short to medium-term investment horizons because they are less volatile. In the aggressive way of investing, stocks are key. Years. 

Equity, by definition, provides a portion of a company's or company's profits.The returns on a stock portfolio are directly proportional to the profitability of the companies (stocks) held in the portfolio. A country's economy grows largely because of your business, and stocks are expected to do well when the economy is doing well and may decline when the economy is weak. This is called the  market cycle. Therefore, one should only invest in stocks if one is a long-term investor as it will reduce market volatility or risk  over multiple market cycles.

Within stocks, one can consider stock shares and stock mutual funds. One of the best ways to invest in stocks is through professionally managed and tightly regulated stock mutual funds that offer  variety and convenience. They consist of actively and passively managed funds. Managed equity funds offer returns that match a market index, while actively managed funds seek to outperform the market index. History has shown that not only do stocks have the potential to beat inflation, they do tooalso to generate higher returns and create long-term prosperity. However, investors should be aware that equities carry the potential for short-term capital losses. long term. 

SUMMARY 

An investor can  invest his money either conservatively or aggressively.The former includes investing in fixed income instruments and debt funds, while the latter includes investing in stocks and equity-oriented mutual funds. Fixed income investments may or may not beat inflation, while stock investments have the potential  not only to beat inflation, but to beat it over the long term. One of the best ways to invest in stocks is through stock mutual funds. Investors should be aware that stocks carry the potential for short-term capital losses.There are two guiding principles when investing in stocks, invest regularly and stay invested for the long term.

What is STP (Systematic Transfer Plan)?

A systematic transfer plan (or STP) gives you the ability to switch your investments from one mutual fund system to another. This is possible for plans of the same checkout. If you break it down, STP is actually a different form of SIP. Instead of transferring money from your bank account to the mutual fund, you regularly transfer money from one fund to another. 

How STP works

To start a STP, you must select two funds: The fund from which the money is transferred, the fund to which the money is  transferred later can choose whether you want  to transfer transactions monthly or quarterly.Fixed STP - You can transfer a fixed amount from one fund to another. Capital Appreciation Plan: You can only move profits from one fund to another. 

Flexible Plan: 

You can transfer a variable amount. This includes a fixed amount that represents the minimum amount to be transferred and a variable amount that depends on market volatility. STP can be a good investment strategy when you need to invest a large amount  in stocks but want to do it gradually.So, instead of putting a lump sum in an equity fund, you can invest the amount first in a liquid fund.This can be a safer option as liquid funds come with low risk.Following this, you can transfer a fixed amount into the equity fund just like a SIP.Here, you can earn potential returns on the liquid fund as well.

What is SWP (Systematic Withdrawal Plan)?

 The Systematic Withdrawal Plan (or SWP) is a repayment plan that allows you to withdraw a fixed amount from your fund at regular intervals. You can think of this as the complete opposite of SIP, because if SIP is an investment plan, then SWP is a retirement plan. With systematic retirement plans, you can adjust cash flow to meet your needs. You can also choose to  withdraw only the capital gains on your investment or a fixed amount. In this way you have not only invested your moneyThe money  you withdraw can  be used to reinvest in another fund or  be held by you in the form of cash. Key Features of SWP We have discussed what is SWP or Systematic Payout Plan. 

Let us know how the SWP plan works: SWP generates cash flows (income) by redeeming program shares at the specified interval.The number of shares redeemed to generate this cash flow depends on the size of the SGP and the plan's net asset value at the payout date. The example investor invests a lump sum of Rs 10.00 lakhs in a mutual fund scheme. The net asset value of the purchase  is 20 rupees; therefore 50,000 units are allocated. Suppose the investor started a monthly SWP of Rs 6,000 a year from the date of the investment  just to avoid drain charges.

Let's assume that the NAV of the program was Rs 22 in the first month of SWP. To generate Rs 6,000 the AMC redeems 272,728 units (Rs 6,000 / 22 NAV) therefore the balance units are now 49,727,272 (50,000 minus 272,728).Assuming the  NAV is 22.50, the AMC redeems 266,667 units (Rs 6,000 / 22.50 NAV) in the second month, hence the unit balance reduces to 49,460,605 (49,727.272 minus 266,667). Assuming NAV is 23.00,  AMC resolves 260.8696 units (Rs 6,000 / 23.00 NAV) and now the unit balance is reduced to 49,199.7354. This process continues each month until the end of the investor's chosen SWP period. As seen in the example above, the unit balance in the SWP plan decreases over time, but as the plan's NAV increases to a higher percentage  than the payout rate, the  value of the asset increases.To take the example above, after the third SWP payment the value of the fund is Rs 11,31,593.91 (49,199.7354 units x Rs 23 NAV) versus the investment value of Rs 10.00 lakhs: an increase in value of Rs 131,593, 91However, if the  NAV schema instead increases instead of increasing, the impact on its investment value  is Leoposite.

What is SIP (Systematic Investment Plan)?

 A systematic investment plan (SIP) is a disciplined approach in which it invests in which it invests a fixed amount of money in an investment fund at regular intervals.The SIP strategy ensures that you buy more fund units when the market is going down and fewer units when the market is going up. Here's how  your mutual fund shares are allocated to you when you invest through SIP: Number of Shares = (Investment Amount/Fund NAV) Imagine investing Rs.5,000 in a mutual fund every month. 

Let's take two situations where the NAV of the fund is Rs.20 and Rs.16. 

Case #1: The NAV of the fund is Rs.20 Case #2: NAV of the fund falls to Rs.16.

No.of units = 5,000/20 = 250.No.Units = 5,000/16 = 333 units. 

Either way, you end up with a win-win situation. You buy more units when the market goes down, while the value of your investment increases when the market goes up. At the time of redemption, all shares in your fund  will have the same value. Just that you bought some at a lower price and others at a higher price.In the long term, the total cost  is average.Anyone Can Invest SIPs are easy to understand and anyone can invest in them. 

SIP investments do not require in-depth analysis or market research. You don't even have to actively follow the development of the market. Find a fund that fits your goals and keep investing.This way you can avoid market timing and other unsafe strategies. Easy to Invest and Monitor You don't have to waste a lot of time out of your schedule investing every month. Once you've found a fund you like and completed all the necessary paperwork, you can put a standing order in your bank account to transfer a fixed amount to the fund each month. You can follow the fund's performance directly on your smartphone.The fund house also regularly sends account statements to your verified email account. 

The Power of Compounding The power of compounding is perhaps the main benefit of investing through SIP. It ensures that your financial  returns generate a return of their own. consistent investments.However, this works best if it invests in the long term to invest  early to maximize your investment yield.

ASSET REBALANCING

 Asset rebalancing is the most useful  yet  most ignored idea in the investing world. However, it's actually quite easy to implement, especially for mutual fund investors. It pays to carefully understand the concept and see if it can work in your portfolio. Asset rebalancing means investing in a targeted manner in terms of how much of your investments should be in debt and how much should be in equity. Since the two will not climb together, the  part involves "rebalancing".regularly change money from one to the other  to stay on target. However, this is a simplistic view. It's much better to do it on a rule-based principle. It's the right time to decide that a certain percentage of your investments should be invested in fixed income and the rest in stocks. 

For younger investors, the retirement ratio could be as high as 10 percent, but it shouldn't be zero.It could be higher for those with a more conservative approach. Retirees may have a different approach. But these are only guidelines. shade of grey. About once a year  you can “rebalance” your portfolio.That is, if the actual balance differs from the desired one, you will have to switch money from one to another in order to reach the original balance. If stocks are growing faster than fixed income, which is what I would most likely expect from the time: I would periodically sell some stock investments and invest the money  from the sale in fixed income to restore balance.Both are easily solved by using a balanced background. These funds are the least appreciated idea in mutual fund investing. Balanced funds do all this automatically and tax-efficiently. 

More importantly, when  equity markets are down, break-even bottoms are expected. also fall, but the fall is relatively small.While mixed funds typically invest more than 65 percent of their assets in stocks to qualify as an equity fund for tax purposes, less aggressive rebalancing options are also available. Monthly income plans, or MIPs, generally keep capital at less than 20 percent or so. and can be a good option for more conservative investors looking for low equity exposure.

Understanding the Retirement Planning - Part 2

Retirement gives you the opportunity to spend the golden years of life the way you want and with the same or better lifestyle that you enjoy today. This allows you to remain financially independent to cover daily expenses as well as medical emergencies that may arise in old age. Therefore, prudent retirement planning is the key to financial security. And for that, it is important to analyze your current finances.Your financial health as of today will help you and your financial planner derive a course of action to achieve sustainable life planning for retirement. So when it comes to your personal finances, it's important to first know how healthy you are financially today. Your financial health can be measured by the income you earn and the commitments you make. 

These 3 simple personal finance rules to get you started are here to see where you are today. Retirement planning is about financially preparing for life after retirement and for all other aspects of life. work and others. Holistic pension planning gives equal consideration to all areas. The importance of old-age provision varies in different stages of life.When you're young, saving for retirement is just putting enough money aside for retirement. In the middle of your career, you can start setting specific income/wealth goals and taking the necessary steps to achieve them. Decades of saving pay off when you retire. 

Retirement planning is, in the simplest sense, planning to be prepared for life after retirement, not only financially, but in all areas of life. Non-financial aspects include lifestyle chapA holistic approach to retirement planning takes all of these areas into account. The importance of old-age provision changes at different stages of life. When it comes to retirement planning, early on in your working life, it’s all about putting enough money aside for retirement. It may also involve setting specific income or wealth goals and taking steps to achieve them. Retirement planning means preparing for your future life today so you canThis includes setting your retirement goals, estimating the amount of money you need and investing to build your retirement savings.

Understanding the Retirement Planning - Part 1

When you are young, it is extremely difficult to think about retirement planning. Young people are busy starting a career, starting a family or settling in, so it is understandable that they are reluctant to talk about retirement planning so early in life. Life goes by so quickly though. Every year you waste putting off retirement planning means adding a year that robs you of  early retirement and enjoying the golden years. Therefore, this module will help you as a young person to get started this conversation about your future. One of your life goals  should be to retire through a financially comfortable and stress-free lifestyle with financial freedom and security. Retirement provision is the crucial task for this goal, because you decide how you  live when you are old and no longer want or can work. 

There are  a number of factors to consider: how old you expect to be when you retire, how much money you  need to cover  living expenses, and your other post-retirement plans.In general, retirement planning are planning their finances for  life after stopping up to date.You can choose to invest yourself with or without the help of financial planners. Your attitudes, knowledge and information inherently influence your behavior regarding retirement planning. Attitudes include how you take responsibility and tolerate financial risk. If you're more likely to take financial responsibility for your future, you're more likely to contribute to retirement savings.To fully invest in your retirement, you need to acquire financial and numeracy skills as a young person.

Retirement is secure and you  live on after retirement. Therefore, the costs will exist even at such times. Both expected and unexpected outputs will occur. Expected expenses include household expenses, voluntary expenses, children's school and college fees, EMI payments, saving and investing for your retirement, etc. Unexpected expenses include medical emergencies, setting up a security fund to compensate for job loss, etc.Therefore, you need a retirement plan to cover these expenses. 

Retirement Planning by Age 20-30-40

 Start planning for retirement in your 20s 

When it comes to saving and investing, the sooner the better. Starting young can give you a head start and also allow you to experiment with different types of products. For example, at the age of 20, you still have  four decades to correct your bad financial decisions. Equities may appear attractive to young investors because of their long-term return potential.Investing in mutual funds can be a good option for retirement planning. Market-linked returns and the power of compounding help multiply the corpus over time. It can help fight inflation. If you can't make a global investment, get a SIP. The habit of saving is instilled.Be sure to diversify your investments across different products to benefit from different risk and return profiles. 

Start saving for retirement at 30 

It's not too late to start saving for retirement. purse together. You can afford to take some risk, but not as much as you did in your 20s, considering your responsibilities  have increased too.Aside from an emergency fund with at least three months of spending, you should put about 50 percent of your savings into a retirement fund. This can be a mix of fixed income investments as well as stocks or mutual funds in India. SIPs are still a good way to think about it. 

Start saving for retirement at 40. 

Better late than never.After the age of 40 or 50, you have much less time to plan your retirement. This is also the time when you may need to make important financial decisions such as B. the higher education of your children or the marriage. However, that doesn't mean  you should ignore your retirement. Start cutting  unnecessary expenses, and make sure to allocate at least 50 percent of your retirement savings  (more if you can manage it).However, you cannot afford to lose too much money right now. Balance it  with investments in bonds, fixed income and liquid instruments. Also, assess your wealth and see how it fits into your retirement plan. Secrets of a Smart Investor Smart investors have a few tricks up their sleeve that can help them retire rich.

Here are some smart saving tips: 

Start as soon as possible. Start saving for retirement now. Diversify your investments. Don't put all your money in one bucket, as tempting as it may seem.Even if you're a risk-averse investor, put some money in mutual funds so you can take advantage of compounding. Save your rewards instead of spending them on vacations and impulse purchases. Increase the amount you invest and save each year, along with the increases you receive. 

Key points for the Retirement Planning

Needful Income After Retirement 

Most people have no idea approximately how much income they would need to be financially independent after retirement. financial crisis later in life. Everyone has different needs and following general rules can be misleading. Retirees tend to spend on different things, taking into account their lifestyle and incomeThis can translate into annual or monthly savings figures. 

Planning for Health 

In today's fast-paced life, maintaining good health is often a tedious task. With numerous age-related complaints and diseases, the treatment costs burn a hole in your pocket. , which forces you to break your savings early or seek financial help. To avoid such circumstances, it is recommended to get medical insurance that covers unsolicited medical expenses and hospitalization.

Diversification

Whether it's employee stock options or pure trust in a company, most people tend to carry large amounts of select company stock. They choose not to diversify because they think they know these companies well. risky behavior and may restrict other investment opportunities. A balanced portfolio of equity and debt can help your investments generate potential returns.

Liquidity

Retirement planning is effective when saving begins at a young age. It is a long-term goal and throughout life different situations increase the chances of using the money saved. It is imperative that such investments have a lock-up period or penalty for redemption before the expiration date. This acts as a deterrent and helps curb the propensity for regular investment disruption.

Review 

The world is undergoing socio-economic change; Now more than ever. Sticking to a long-term financial plan without thinking about it can lead to erratic performance. A change of job, city, the birth of a child, changing markets and many similar factors require a change in saving behavior. The AnalyzeAssessAdapt approach, in which the retirement plan is reviewed every few years, helps account for market and lifestyle changes and makes the plan more dynamic.

Liability 

Long-term debts such as home loan, real estate loan, car loan and monthly EMI payments for various short and long term investment goals related to children's education, marriage, buying a second home, etc., take up a significant portion of your monthly income . Now imagine that such debt persists even after you retire. Such payments will seriously affect your financial health after retirement.To avoid such scenarios, make sure you take care of all your debts before retirement age.

Inflation

Inflation is a demon that hits hard on anyone who ignores it. Because retirement is a long-term goal, it's important to understand the impact of inflation on your financial goals. Inflation is the rate at which prices are increasing. Significantly reduces electricity purchases.If you ignore inflation, you'll save far less than you'll need for years to come. If you are spending Rs 50,000 every month at 30, at 60 you will need Rs 3.81 lakhs per month  assuming  prices go up 7% every year. You must invest in  a way that will outperform inflation, ie generate returns that are at least a few percentage points above the rate of inflation.

SWP is more tax efficient than dividends - Part II

Therefore, most investors should switch from dividend plans to growth plans. There may be an impact on taxes and exit charges at the time of the change, but these may have an overall negligible impact. When investing in mutual funds (MF) an investor has two basic options to choose from: growth and dividends. Under the dividend option, there are two sub-options: dividend refund and dividend payment. In the growth option, the total invested capital  grows over time in a fluctuating manner based on movementsstock markets. While the dividend return option is quite similar to the growth option, under the dividend payment option, asset management companies (AMCs) pay dividends to investors when they have distributable earnings from a particular MF program. Some AMCs pay regular dividends on some MF programs, so investors choose the dividend payment option to earn regular dividend income. 

However, with regular dividends, there may be a risk of a decrease in invested capital  if the dividend is paid in a low market withoutGrowth and dividend options are available in both equity and debt funds. Bond funds are less likely to lose capital on the dividend payment option because they are less volatile than stock funds. However, until now, dividend distribution tax (DDT) on debt funds has been higher than on stock funds, which has been a deterrent. Despite these disadvantages, many investors used to opt for the dividend payment option in order to generate regular income since the dividends were tax-free in the hands of the investors.In the 2020 Budget, Finance Minister Nirmala Sitharaman eliminated DDT but  made dividends taxable. Unlike DDT, the new tax rule makes dividends more taxable for those with higher incomes than those in the lowest income bracket. 

It is recommended that investors better choose the growth option instead of the dividend payment option. To generate regular income from the growth option, an investor can implement a systematic payout plan (SWP).Like the Systematic Investment Plan (SIP) used for regular monthly investments, particularly in stock funds, SWP is a regular withdrawal system where you can choose a day of the month when you  receive the payback product. To avoid capital erosion, an investor should opt for a lower SWP so that withdrawals are made from the growth portion and the invested capital remains protected. The advantage of the  SWP over dividends is that the SWP is subject to capital gains tax,while dividend income entails income taxes. For example, on dividend income of Rs 6 lakh in a tax year under the new tax regime, an investor in the top tax bracket will have to pay up to 30 per cent in tax, while in the case of SWP an equity MF investor will have to pay 10 per cent in tax, and  only on the profit portion over Rs 1 lakh in a financial year. Debt fund investors  pay a very low 20 percent tax on long-term capital gains (LTCG) after indexation. So SWP is a better option

SWP is more tax efficient than dividends - Part I

If you have already invested in the dividend payment option for regular income mutual funds, you should reconsider your investment as the dividend option may no longer be attractive  due to the proposed changes  in the 2020 budget. Currently, a 10% Dividend Distribution Tax (DDT) is levied on mutual equity-oriented funds and dividends are tax-free in the hands of investors. Budget 2020 (effective  April 1, 2020)  abolished DDT and instead made dividends taxable in the hands of the investor.So if you have a tax flat rate of more than 10%, you should now decide on the growth plans and use the systematic pension plan (SWP) to generate regular income. SWP is more tax efficient as profits are taxed at 10% (assuming a capital gains tax rate) compared to dividend option (taxed at your slab rate). In SWP, when you receive the amount, it consists of both appreciation and capital. There are no taxes on the return of capital, so there will always be less tax debt.From a purely tax perspective, investors with a tax bracket below 10% may appear to benefit from remaining in the dividend plan. claimed after submission of the return. This makes filing the tax return cumbersome. As LTCG is only charged on profits over INR 1 lakh annually regardless of tax plate, you may not have to pay  tax on your withdrawals under the SWP vs plate rate in diSo even if you're in a lower tax bracket, it makes sense to switch your investments from the dividend plan to the growth plan.

Many investors within the past, especially senior citizens wont to believe open-end fund dividends along side bank interest for his or her regular cash-flows. However, with change in dividend taxation it's now become tax inefficient. Though the govt has abolished Dividend Distribution Tax (DDT), dividends are going to be taxed as income in your hands; open-end fund dividends or IDCW payments are going to be added to your income and taxed as per your tax rate. Systematic Withdrawal Plan (SWP) is far more tax efficient way of getting regular cash-flows from your open-end fund investments. SWP generates cash-flows for investors by redeeming units of open-end fund scheme at specified intervals. the amount of units redeemed to get cash-flows in an SWP depends on the SWP amount and therefore the scheme Net Asset Values (NAV) on the withdrawal dates. Each SWP payment will attract short term or future capital gains tax counting on the date of investment and date of SWP payment. For long SWP tenures, you'll avail future capital gains taxation benefits.

Capital gains tax on Mutual Funds

Capital gains tax in equity mutual funds 

One important thing for investors to notice is that there's no tax on unrealized gains in mutual funds; incidence of capital gains taxation arises only upon redemption. There are two sorts of capital gains in equity mutual funds. Redemption of equity open-end fund units held for fewer than 12 months results in short term capital gains taxation, while redemption of units held for quite 12 months results in future capital gains taxation.

Short term capital gains are taxed at 15% (plus applicable surcharge and cess). future capital gains of up to Rs 100,000 during a year are tax exempt and taxed at 10% (plus applicable surcharge and cess) thereafter. for instance , if your future financial gain during a year is Rs 200,000, Rs 100,000 are going to be tax exempt and you'll need to pay capital gains tax on Rs 100,000 only at the speed of 10% (plus cess) i.e. tax outgo of Rs 10,400 only. you'll see that from a taxation perspective, equity mutual funds are far more tax efficient than traditional fixed income investments.

Capital gains in non-equity mutual funds 

Let us first understand what non-equity mutual funds are. Any open-end fund scheme, where average equity allocation is a smaller amount than 65% are treated as non-equity mutual funds from a taxation standpoint. Non-equity mutual funds include debt funds, conservative hybrid funds, international funds or fund of funds, gold funds etc. There are two sorts of capital gains in debt mutual funds. Redemption of debt open-end fund units held for fewer than 36 months results in short term capital gains taxation, while redemption of units held for quite 36 months results in future capital gains taxation.

Short term capital gains in non-equity mutual funds are taxed at as per your tax rate; during this regard, tax treatment of short term capital gains in such funds and interest income from bank FDs is same. future capital gains in non-equity funds are taxed at 20% after allowing indexation benefits. Indexation benefits imply that you simply are allowed to index the acquisition cost of your units as per Cost Inflation Index (CII) table supported the year of investment and year of redemption. Indexing increases your cost of acquisition and reduces your capital gains amount, thereby reducing your tax obligation. So for investment tenures of over 3 years, non-equity mutual funds have a big advantage over traditional fixed income investments.

Myths and Facts about investing in Mutual Funds

 Myth 6:Mutual funds only invest in equity markets. 

Fact: Mutual Funds have a diversified portfolio that has equity shares, government treasury bills, cash equivalent , gold, company deposits, land , etc. Mutual Funds allow investors to create diversified financial portfolios through exposure to a spread of asset classes. 

Myth 7:Too young to start out investing 

Fact: On the contrary, the first you start investing, the more wealth you'll accumulate. there is no "Too Young" when investing in mutual funds. The expert analysts and portfolio managers in Mutual Funds enable anyone with an intent to start out investing regardless of their age, experience, and profession. Experts also believe that it's better to take a position in mutual funds from an early age. that's because it allows you to stay invested within the marketplace for an extended period and have time to your advantage when the market suffers an unprecedented crisis. 

Myth 8: SIPs are best suitable for Equity Mutual Funds 

Fact: regardless of the sort of open-end fund you select to take a position in, SIPs remain a viable option. Whether it's equity, debt or hybrid mutual funds, SIPs are suitable for every one among them. Any information that says otherwise is nothing but hogwash. 

Myth 9: Debt is best than equity 

Fact: Debt funds and equity funds have their strengths and weaknesses, but it might be unfair to mention one is best than the opposite as they serve different purposes like debt funds remain stable against market downfall. In contrast, equity funds are known to supply better returns. Depending on your specific situation, you'll find that perhaps debt funds serve your budget better than equity or the other way around . But, first, understand both the mutual funds thoroughly and see which one aligns better together with your requirements. 

Myth 10:Know Your Customer (KYC) is required Multiple Times for open-end fund Investments. 

Fact: Although KYC is mandatory for investing in Mutual Funds, it is a convenient one-time process. With digital banking, the method has become seamless with just a couple of steps. So don't fret about the KYC process; fear the misinformation surrounding mutual funds that hinder investors such as you from unlocking a fantastic investment opportunity.

Myths and Facts about investing in Mutual Funds

Myth 1: you would like an outsized sum to take a position in mutual funds 

Fact: one among the prominent USPs of mutual funds is its incredibly low barrier entry. Through SIP(Systematic Investment Plan), you'll invest as low as Rs. 500 per month in mutual funds. therefore the concept you need a supposedly large sum to take a position in mutual funds may be a myth. Mutual funds have enabled students and entry-level professionals to venture into this previously inaccessible world of investments and financial planning. 

Myth 2: Mutual funds are riskier than shares 

Fact: Mutual Funds are the safer cousins of shares. While investing in individual shares, all of your eggs are within the same basket, but the core of mutual funds is to diversify your investment, making it the safer investment choice of the 2 . For example, as against riding all of your money on one horse, mutual funds invest your money in 20 different stocks. So you'll easily judge which is that the safer investment option. 

Myth 3: you want to have a DEMAT account to take a position in Mutual Funds 

Fact: you'll buy the mutual funds units either as a physical statement or dematerialized form. So, it's not compulsory to possess a Demat account for investing in mutual funds. 

Myth 4: Mutual funds are available just for the future 

Fact: Mutual funds are often long-term, short-term, or maybe medium-term, counting on your financial needs and investment objective. However, Mutual funds are known for the high returns that they supply by the facility of compounding which works once you are in it for the future . Based on your needs, you'll choose between a spread of mutual funds. for instance , if you're trying to find a brief and medium-term investment opportunity, debt funds are more suitable for you. However, long-term investment involves equity funds. Mutual Funds are best fitted to long-term investment. Long-term funds are known to supply multiplied returns. 

Myth 5: open-end fund investment features a lock-in period and one cannot redeem investment easily. 

Fact: Tax saving (ELSS) mutual funds and closed-ended mutual funds have a lock-in period, for other open-end fund investments there's no lock-in period. However, exit load could be applicable on premature withdrawal surely open-end fund investments supported the sort and period of your investment. 

Myths and Facts about investing in Mutual Funds

Myth 1: Mutual Funds are just for long-term investing 

Fact: you'll do goal-based investing in mutual funds. Your goal tenure are often short-term, medium-term or long-term. Mutual funds have different schemes around various investment objectives and horizons. you'll also invest in mutual funds for ultra-short goals (ultra-short debt funds) or emergency corpus creation (liquid funds). 

Myth 2: Mutual funds are for experts 

Fact: Mutual funds are professionally managed. The fund manager conducts advanced marketing research and makes necessary decisions associated with the investments within the fund. Therefore, you would like not be a market expert in investing in mutual funds. 

Myth 3: Investing in mutual funds is that the same as investing in stocks 

Fact: Mutual funds invest in equities and debt, fixed income, gold, and market instruments. you'll invest in any of those assets or a mixture of them through mutual funds, supported your goals, tenure and risk appetite. 

Myth 4: Mutual funds with a lower NAV are better 

Fact: The NAV or Net Asset Value of a open-end fund is that the total market value of its underlying assets instead of its market price. In simple terms, the difference during a fund’s NAV between the 2 dates would indicate how that fund has performed during that period. Comparing the NAV itself thereto of other funds won't be helpful. Therefore, considering the NAV comparison of open-end fund s are often irrelevant while choosing a mutual fund. 

Myth 5: you would like an outsized amount of cash to take a position in mutual funds 

Fact: Your single open-end fund SIP (Systematic Investment Plan) investment are often as low as 500. Another striking feature of mutual funds investing is snackable and regular investing. Therefore, you'll start with just a SIP of 500 or a payment of 5000 (1000 subsequent payment additions) with no upper limit. 

Myth 6: you would like a Demat account for open-end fund investing 

Fact: you simply need a Demat account for investing in an ETF (Exchange-Traded Fund). you'll also need it if you would like to carry any open-end fund in Demat mode. you are doing not need a Demat account for investing in mutual funds otherwise. 

Myth 7: Mutual funds give guaranteed returns 

Fact: Returns in mutual funds are subject to their asset and risk profile. Mutual funds being a basket of assets whose returns are linked to the worth of the underlying assets and should vary from time to time. Therefore, mutual funds cannot give guaranteed returns. 

Myth 8: you ought to select a scheme with the simplest past performance 

Fact: you ought to not consider past performance only as a parameter for future performance. this is often because the markets and economic conditions keep changing. Therefore, it's better to seem at the explanations for the fund’s performance, its underlying assets and therefore the fund manager’s experience before investing. 

Myths and Facts about investing in Mutual Funds

Myth 1: Mutual Funds are only for long-term investing

Fact: You can do goal-based investing in mutual funds. Your goal tenure can be short-term, medium-term or long-term. Mutual funds have different schemes around various investment objectives and horizons. You can also invest in mutual funds for ultra-short goals (ultra-short debt funds) or emergency corpus creation (liquid funds).

Myth 2: Mutual funds are for experts

Fact: Mutual funds are professionally managed. The fund manager conducts advanced market research and makes necessary decisions related to the investments in the fund. Therefore, you need not be a market expert in investing in mutual funds.

Myth 3: Investing in mutual funds is the same as investing in stocks

Fact: Mutual funds invest in equities and debt, fixed income, gold, and money market instruments. You can invest in any of these assets or a combination of them through mutual funds, based on your goals, tenure and risk appetite.

Myth 4: Mutual funds with a lower NAV are better

Fact: The NAV or Net Asset Value of a mutual fund is the total market value of its underlying assets rather than its market price. In simple terms, the difference in a fund’s NAV between the two dates would indicate how that fund has performed during that period. Comparing the NAV itself to that of other funds might not be helpful. Therefore, considering the NAV comparison of mutual funds can be irrelevant while choosing a mutual fund.

Myth 5: You need a large amount of money to invest in mutual funds

Fact: Your single mutual fund SIP (Systematic Investment Plan) investment can be as low as ?500. Another striking feature of mutual funds investing is snackable and regular investing. Therefore, you can start with just a SIP of ?500 or a lump sum of ?5000 (?1000 subsequent lump sum additions) with no upper limit.

Myth 6: You need a Demat account for mutual fund investing

Fact: You only need a Demat account for investing in an ETF (Exchange-Traded Fund). You may also need it if you want to hold any mutual fund in Demat mode. You do not need a Demat account for investing in mutual funds otherwise.

Myth 7: Mutual funds give guaranteed returns

Fact: Returns in mutual funds are subject to their asset and risk profile. Mutual funds being a basket of assets whose returns are linked to the price of the underlying assets and may vary from time to time. Therefore, mutual funds cannot give guaranteed returns.

Myth 8: You should select a scheme with the best past performance

Fact: You should not consider past performance only as a parameter for future performance. This is because the markets and economic conditions keep changing. Therefore, it is better to look at the reasons for the fund’s performance, its underlying assets and the fund manager’s experience before investing.

Myths and Facts about investing in Mutual Funds - Part III

 Myth 9 : One must invest in several mutual funds to avail the advantage of diversification 

Fact: Mutual funds by itself invest across asset classes like equity, debt and market instruments, which give investors with the advantage of diversification of risk. In mutual funds, investors can diversify their portfolio basis their risk appetite and alter it from time to time, whenever and wherever necessary.

Myth 10 : Buying top rated mutual funds guarantees better returns 

Fact: open-end fund performances are subject to plug risks and should vary from time to time. Thus, it's not certain that a fund which will have performed well within the past will do so within the future also . Investments in mutual funds got to be tracked and reviewed from time to time to make sure it's performing as per the necessity of the investor.

Myth 11 : you would like a demat account to take a position in mutual funds 

Fact: you are doing not need a demat account to take a position in mutual funds. By filling up the appliance form and ensuring that you simply are KYC compliant, you'll choose the fund and submit a cheque to form the investment. However, to ease the method of investing and obtain better guidance, you'll engage a financial adviser throughout.

Myth 12 : Mutual funds are unsuitable for beginners 

Fact: Any investment, if avoided appropriate knowledge are often dangerous. Mutual funds offer high transparency with reference to where and the way the funds of the investors are invested. New investors could consider starting an SIP during a open-end fund , through which they might invest small regular amounts monthly and gradually increase overtime. Financial advisers should be consulted for professional advice in investing, reviewing and tracking the performance of the mutual funds.

Myths and Facts about investing in Mutual Funds - Part II

Myth 5: SIP and STP is same. 

Facts : Though they sound same and have similar benefits but the working may be a bit different. In SIP you invest a fix amount at regular intervals. When the market are higher, lesser units are purchased and once they are low, the amount of units purchased is higher. Over an extended investment window, the value averages offering a lower overall price . STP simply means a hard and fast amount on a predetermined period as per the mandate submitted by the investor is transferred from one scheme to a different 

Myth 6 : Dividend pay-out/Growth is all an equivalent 

Fact : No. during a dividend pay-out option the dividend declared by the scheme is paid bent the investor. within the growth option, it's retained within the scheme and is reflected within the Net Asset Value (NAV) of the scheme. The dividend pay-out option offers regular income (based on the supply of distributable surplus), while the expansion option gives you a compounded benefit through a better NAV.

Myth 7 : Investment in open-end fund carries a better risk than the stock exchange 

Fact : A open-end fund invests during a big selection of equity and/or debt instruments as defined in its investment objective. The fund manager selects stocks meticulously to attenuate the danger and maximise diversity. This makes investment in open-end fund less risky than direct investments in stocks. However, investors are requested to consult their financial advisors before investing.

Myth 8 : Mutual Funds need large investment 

Fact: Mutual funds don't need large amounts to start out with, you'll start with whilst low as Rs. 500 per month, through a tool called Systematic Investment Plan (SIP) during a open-end fund wherein you're allowed to take a position a daily monthly instalment within the fund, basis which units would be purchased in your folio. In fact, the sooner you begin investing, the higher it might be for your money because it would get to undergo compounding for a extended period.

 

Myths and Facts about investing in Mutual Funds - Part I

 Myth 1 : Investing in schemes with lower NAVs can generate gains 

Fact : internet Asset value (NAV) is just the worth at which a unit of particular scheme are often bought or sold. So, investing in schemes having a NAV of Rs. 50 or Rs. 500 is not any where associated with the gains you'll expect from your investments. a number of the factors which will be considered are rate of return , the performance and volatility of the scheme, etc to call a couple of . 

Myth 2 : If a fund announces dividend, then it's an honest time to shop for . 

Fact : Dividends are announced supported the excess profit collected by the fund from its holdings. This surplus profit is retained within the fund until it's paid bent the unit holders and reflects within the NAV of the scheme. When the dividend is paid out, the NAV drops reflecting that change. Hence, investors don’t gain anything by timing the acquisition . 

Myth 3: Sell when the NAV is high and invest in schemes with low NAVs 

Fact : once you buy a share, you track the share price and sell when it rises to a particular level above the acquisition price. open-end fund schemes invests the quantity collected by the investors in shares The NAV of a open-end fund is that the value of the scheme’s assets minus its liabilities, divided by the entire number of units. A high NAV doesn't mean that the fund will offer great returns and neither does a coffee NAV means otherwise. 

Myth 4 : open-end fund investments are all about timing 

Facts : Most investors fall for this. Attempts to time market are met with disasters and investors are usually advised against it. Investors may choose Systematic Investment Plan (SIP) or a scientific Transfer Plan (STP) and aim to profit from the Rupee Cost Averaging of your investment.