Understanding Tax Mutual Funds Investments |
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| By Govindan |
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| Mutual Fund is basically a ´trust which ´through its various
schemes safeguards ´the investments of small and big
investors܂ Every scheme of each of ´these mutual funds has
different ´terms and conditions܂ By nature mutual funds are
not ´tax saving instruments܂ However‚ investment products in
these funds may offer ´tax savings܂ ELSS schemes which are commonly known as ´tax mutual fund is a category where equity and equity related instruments are invested܂ Investment up ´to 1 lakh is ´tax exempted under section 80C܂ However‚ ´these schemes have a lock in period of 3 years before which you cannot withdraw܂ The dividends received by ´the investor are also ´tax free܂ ELSS is a very good ´tax saving instrument which ensures good returns܂ However‚ you need ´to invest carefully after devoting sufficient ´time ´to select ´the right fund܂ There are different ´types of ELSS schemes which are categorized as growth and dividend options܂ In ´the Growth option of ELSS scheme‚ ´the investor does not get money during ´the investment ´tenure܂ He gets ´the entire lump sum amount at ´the ´time of maturity܂ On ´the contrary dividend option of ´tax mutual fund has ´two choices and ´they are • The investor can either cash on ´the dividends • The Investor can opt for dividend re-investment option܂ The choice of growth or dividend options solely depends upon your priorities܂ Just by going ´through ´the ´track records does not mean ´that you have got ´the best mutual funds܂ Mutual Funds in India have some quantitative measures ´that you should consider ´to evaluate ´the best option for you܂ These are • Expense Ratio – This ratio points ´to ´the expenses of funds annually‚ including ´the administrative and management cost܂ • Sharpe Ratio – This ratio works as an indicator ´that your returns are either due ´to smart investing decisions or due to excess risk܂ Remember‚ higher Sharpe Ratio is always better܂ • Alpha Ratio – It is an indicator of risk relative ´to ´the benchmark Index܂ If ´the alpha is more ´then it is always better for an investor܂ • R-squared – It is method ´to measure ´the percentage of an investment’s movement܂ Today mutual fund online have created great opportunities ´to manage your account easily܂ You can sell and redeem units online without any hassle܂ Having an access ´to your account 24/7‚ no manual filling of application form and keeping a track of investments 24/7 are few of ´the benefits of choosing online investments܂ Most of ´the banks and institutions have mutual fund online options with easy accessibility܂ You can apply for an E-PIN number ´to manage and access your account comfortably܂ However‚ it is important ´to consider your risk ´taking aptitude before you select a mutual fund܂ Mutual funds in India are gaining grounds܂ It has become one of ´the most popular choices for investing money܂ The flexibility‚ diversification‚ professional management‚ less risk‚ easy ´to redeem are all few of ´the benefits of mutual funds܂ You will need ´to understand yourself as an investor first and ´then opt for mutual fund schemes܂ Market being volatile‚ you will need ´to analyze your behavior in handling risk܂ |
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| Article Source: http://interpret.zar.vg | ||||
| About The Author Details of tax mutual fund schemes from the leading company offering mutual funds in India. |
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