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How to invest in mutual fund?

Date: 02 Oct 2011   Group: Finance and Investments    Category: Mutual Funds   


Dear all,
i jsut come in taxable category and i would like to save money as well as increase the saved amount. i know mutual fund is risky,but i wanted to ask that if i am going to invest in MF then what sort of planning is needed in such a volatile market and where should i invest to increase my savings with less risk. Already i have made 2 Lic policy but increament in that seems to be very low with more time spent. So, i want all your views.
Thank you



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Author: S Ramakrishnan    05 Oct 2011      Member Level: Gold     Points : 1    Voting Score: 0

You are just entering in taxable bracket. To reduce tax burden, you do not go for mutual fund. Among the 80cc schemes, you can save in PF, PPF, and National Savings certificate.

Reference: http://www.raagvamdatt.com/saving-income-tax-understanding-section-80c-deductions
Author: YKReddy    05 Oct 2011      Member Level: Silver     Points : 2    Voting Score: 0

Hi Chandan,

You can invest in PF ,PF and PPF and we can invest in MF.But we have to see the correct company to invest.
Investors select Tax-Saving funds (also called ELSS- Equity-Linked Saving Schemes ) will come under the Section 88 (of the Income Tax Act) benefit.

See more details in below links.

http://www.investmentyogi.com/taxes/best-tax-saving-mutual-funds-for-2010.aspx

http://www.rediff.com/money/2005/jan/24perfin.htm

Thanks




Author: Sudhan    05 Oct 2011      Member Level: Gold     Points : 8  (Rs 6)    Voting Score: 0

Hello Chandan Singh,
I would say that your prediction towards Mutual Funds are not right, They are the safest category in the investments of the individual in the share market.

I would suggest you to search some banks and financial institutions that are doing well in the market. Then you just need to invest in those sectors that are doing well I would suggest you to have your investment distributed in various sections and try to invest in some four or five companies if you feel you are taking risk by investing in a single market.

What Does Mutual Funds Mean

Mutual funds are the part of the shares. Many individuals cannot afford to buy shares in the stock market for a lump sum amount of minimum of 5000 rs. Thereby the Mutual funds companies have broken the shares of say 5000 rupees into various shares of 10 or 50 each that makes it comfortable to buy for the investors.

How Mutual Fund works.

I would say that the mutual fund companies appoint some specialists who can study the market for the company in the stock market, They study both the fundamental and Technical study to know well about the company where they have to invest and they often go to Blue Chips company shares that does not loose it place in the market. These are the companies which never faces any losses, the experts divide the money they got from the public and invest them in various companies that are best ranked in the share market and earn the profit which are divided among the various investors and the company that deals with mutual funds.

The companies are divided in the category like AAA+, AAA-, AA, BB etc., based on the rankings too some of the companies go to buy the shares, and you have got nothing to do other than enjoy the profits from your mutual funds investment every activity will be carried out by the company where you have bought your mutual funds.

Alternatives : Investment on Bonds

If you want more security and reduction in the tax on salary, It would be better to invest in Bonds as these bonds are issued by the government to build the infrastructural facilities of the country and after a period of 5 or more years when the bond gets matured, We can return the bond back it back to the government and get the amount invested on them with an interest.

With Regards,
Sudhan

Author: Chandan Singh    06 Oct 2011      Member Level: Silver     Points : 0    Voting Score: 0

Thanks to all your suggestion and i will surely keep in mind all the above points pointed by all of you. Also many thanks to all your precious thought about tax saving and mutual fund and surely i will be benefitted from your views.
Regards,
Chandan

Author: subhajit mukherjee    07 Oct 2011      Member Level: Silver     Points : 3    Voting Score: 0

Dear Chandan,

If you are eager to invest in Mutual Funds first you should have a Long-term (minimum 7-8 yrs) view for this purpose.

Regarding Tax benefits you can invest in the ELSS Schemes where you should get all the deductions from 80C and when when you will redeem you will get the full value without any tax deductions. More over here you can invest on monthly basis and the lock-in period is also only 3 years which is the lowest among this category.

For capital growth you need to invest in Large-cap fund,Balanced fund,Gold fund, ETFs and a lot more but my advice is that always go for SIPs which will obviously reap benefits for you in future.

Author: subhajit mukherjee    10 Oct 2011      Member Level: Silver     Points : 2    Voting Score: 0

Dear Chandan ,

I want to say that in case of Mutual Funds Investment previously you only need Pan card for documentation purpose but nowadays KYC (Know Your Customer) Document is a Must where you have to furnish you residential proof,cancelled cheque and Pan Card as well.

Other than ELSS and some specified funds you can redeem all your units at any point of time without any lock-in period.

HAPPY INVESTING

Author: Keval    21 Nov 2011      Member Level: Bronze     Points : 2    Voting Score: 0

There are many good tax saving mutual funds in the market. If you are a bit skeptical about investing in mutual funds due to market risk, then I would suggest you to approach some reputed stock brokers providing professional mutual funds investment services. Their experts will suggest you the most potential tax saving mutual funds that will suit your financial profile.

Reference: http://www.geplcapital.com/MutualFunds.aspx?type=PS
Author: Manoj Chaurasia    13 Jan 2012      Member Level: Gold     Points : 6  (Rs 4)    Voting Score: 0

Mutual funds are trusts, which pool resources from large number of investors through issue of schemes. This fund raised is invested in shares as well as debt market.

Mutual funds are of two types:
1. Growth funds
2. Income funds

Growth funds provide higher returns but are risky as they are invested in share market for higher returns.

Income funds are comparatively safer as they invest in debt instruments like government securities and money market instruments and earn interest on same. They provide a steady flow of income with lower risk.

Mutual funds are really safe and highly liquid investments.
There are two kind of schemes in mutual fund
1. Open ended and
2. Close ended

Open ended scheme allows investor to invest and then sell on continuous basis, meaning it is not necessary to hold the mutual fund for any certain fixed period. It can be sold at anytime when need for fund arises.

Close ended schemes have fixed maturity periods of 5 to 7 years, however in this case also to provide for liquidity to investors they are listed at stock exchange and can be sold or traded by investor like shares.

In your case Mr. Chandan, since you want less risk, you should invest in Income funds for safety and accordingly for open ended scheme for high liquidity.


Author: shyam kishor singh    22 Feb 2012      Member Level: Silver     Points : 6  (Rs 6)    Voting Score: 0

Hi Chandan


Mutual fund investment is indirect investment in share market by the experts of the player of the market.They take small investment from the public, invest in shares and distribute the profit/loss among all the investors. Hence, if you want to invest in mutual fund, you should invest for longer period i.e. more than 5years. Please note that for tax saving pupose, you have to invest in tax saving scheme of mutual fund(ELSS) and the lock in period of the mutual fund is 3years.

Since you have mentioned that you want to take less risk, the following investment may be fruitfull for you for tax saving purpose.

1) PPF: Investment in PPF may be good decision for the purpose of tax exemption. The rate of interest you will get on PPF is 8.60%p.a. at present. PPF is opened for 15 years and each year you have to contribute minimum amount of Rs.500/- per annum else Rs.50/- will be debited as penalty in your account. The maximum amount that you can deposite is Rs.70000/- in a year.You can withdraw from the PPF account only after five years from opening of account, which may be up to maximum of 50% of outstanding balance at the end of the preceding year. You can get loan against this PPF after three years.

2) Bank Fixed deposit.The rate of interest on FDR(Tax saving term deposit scheme)is around 8.75% to 9.25%p.a. The lock in period of deposit is 5 years. However, the interest of the bank fixed deposit are taxable.No prepayment of fixed deposit and no loan shall be granted by the bank aganist this Fixed deposit.

3)Infrastructure Bond: You can invest up to Rs.20000/- in infrastructure bond and your your exemption limit under section 80C will increase up to Rs.120000/- from Rs.100000/-.The rate of interest is approximately 9.00% to 9.25% p.a.. The lock in period is 5years.

4) NSE: The rate of interest on NSC is 8% and lock in period of 6 years. The interest on NSC is taxable.The loan may be taken from the bank by pledging the NSC with banks.

You can choose the investment option from the above which suit to your risk appetite, expected return,personal preferences and liquidity of the money.

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