mutual fund Archives -

Is Mutual Fund a New Investment Destination for Indian Women?

Thu, 25 May 2023 17:33:57 +0000

The Buyt Desk

Things are changing for women in India in every sector. They are doing all types of jobs, even the traditional male-dominant bastions. So, when it comes to finance management, they are not behind. Women are doing excellent work in personal finance management.

The latest study by the Association of Mutual Funds in India (AMFI) states that women’s participation in the Mutual Fund industry has witnessed a significant increase in the last few years. It has risen to 14% year-on-year. The number of women investing in mutual funds has increased to 74.5 lakhs in December 2022 compared to 63.8 lakhs in the same month last year. The more interesting fact is that the increased number of women investors in mutual funds is not limited to big cities. Instead, there is participation across the country.

The number of unique investors has tripled from 2017 to 2023. In 2017, the number of women investors in the mutual fund was 1.20 Crore, which has risen to 3.77 Crores in 2023. The leap has come after the Covid-19 breakout.

According to the AMFI, women investors in the 25-35 age group have shown higher participation. It means young professional women have become cautious about their finances and doing financial planning proactively.

In terms of Age

If we break the data age-wise, 35 percent of investors are in the age bracket of 45 years and above. The major contributors are women between the 18 to 24 year age category. Their percentage share has increased in the last ten years.

In terms of Asset

In terms of asset break-up, women investors have invested approximately Rs. 6.13 trillion in regular Mutual Funds and about Rs 1.42 trillion in direct plans.

Women have come a long way in the last few decades and have changed their stereotypical image. It is visible in the field of financial planning as well. They know how to handle their finances to secure their future. The rise in women investors in the Mutual Funds market reflects the same.

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How Does Debt Mutual Fund Help You In Saving Tax?

Fri, 27 Jan 2023 16:09:27 +0000

The Buyt Desk

Fixed deposits (FDs) and debt mutual funds are among the most prominent debt investment options for conservative investors. Compared to FDs, debt funds come with low risk. However, for regular investment options and liquidity, debt mutual funds steal the show.

The short-term capital collected on debt fund investments for under three years is liable to be taxed as per your tax slab rate. However, long-term capital which is gathered on debt fund investments held for over three years is accountable to a 20 percent tax rate with indexation benefits. Capital collected on FD returns is subject to tax slab rates.

According to financial advisors, if investors fall into a higher income tax bracket then debt funds are a more tax-efficient investment as compared to FDs. Want to know how? Keep on reading.

Bank FDs and Debt mutual funds are perfect for investors having low to moderate risk profiles. In terms of taxation, Debt mutual funds provide much better tax efficiency than bank FDs. The reason is that income from debt mutual funds is taxed differently. The interest income gained from bank FDs is taxed according to the tax slab of an individual. On the other hand, the income earned from debt mutual funds is taxed depending on the short-term as well as long-term Capital Gains.

When debt mutual funds are used after holding it for over 36 months then long-term capital gain is taxed at the rate of 20% with indexation benefit. However, when debt mutual funds are held for less than 36 months, a short-term capital gain is taxed at the tax slab of an individual.

Let us assume that you spend INR 1 lakh in a debt mutual fund for 4 years. It has generated a CAGR of 8%. After 4 years, your investment value will be approximately INR 1,36,000. You will have about INR 36,000 gain. When you consider the indexation benefits i.e. inflation adjustment, tax liability you will get on selling the debt mutual funds will be ₹3,566.

When you invest the same amount in FD, with similar return and tenure, you would have to pay a tax of INR 10,800 seeing the investor falls in the 30 percent tax bracket. The tax implications on Debt mutual funds and bank fixed deposits would be the same when investments are held for less than 3 years. Debt mutual funds are comparatively beneficial investment options in the higher tax bracket with an individual’s tax bracket and long-term gain taxation.

Remember that banks are regarded as almost risk-free based on the risk and return comparison because investment is insured up to INR 5 lakh extent. Even the returns are also pre-set. However, returns are market associated with debt mutual funds and are accountable for the risk of interest rate, inflation risk, and default risk.

In another interview, the spokesperson said that for taxation on FD and debt mutual funds, the latter gains a benefit for more than 3 years and above than that. Moreover, FDs earned interest is also taxed according to the income slab rate of the investors. But, no tax is charged on the bank FD’s maturity proceeds. TDS will be deducted by the bank at the rate of 10% when the paid interest amount on a fixed deposit goes beyond INR 40,000 or 50,000 in a senior citizen’s case.

For debt mutual funds, the taxation is based on the holding period (holding period of fewer than 3 years). However, when it comes to the working process of fixed deposits and debt fund taxation, there is not much difference between both. But, the profits or gains are taxed at 20 percent after indexation when you redeem a debt mutual fund after three years. The term indexation here refers to the process of adjusting the investment value in accordance with inflation to shield your capital gains against tax corrosion.

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How To Review Your Mutual Fund Portfolio?

Mon, 02 Jan 2023 16:15:15 +0000

The Buyt Desk

To successfully achieve your financial goals, it is significantly important to timely monitor your mutual fund investments. Don’t know how to review the portfolio of your mutual fund schemes? You will get the right solution here.

What’s the Right Time to Monitor Your Mutual Fund Investment?

Well, there is no hard-and-fast rule on when and how frequently you should review your portfolio of mutual fund schemes. Industry experts usually recommend monitoring your portfolio at least one time annually. The main reason for time-bound monitoring is to analyze whether or not the current investments are provided per your expectations. If not, then you must take some corrective actions.

Alongside this time-bound review, you must review your portfolio when some sudden life events or external shocks occur. Here, the life events mean job loss, childbirth, big pay increase, separation from a loved one, getting married, death of a family member, etc. These life events can cause changes in the financial goals and that’s when you would require a review. External shocks or events like the recession, COVID-19 pandemic, and wars can also change the business world and financial market, which again warrants portfolio monitoring.

Things to Check During Mutual Fund Portfolio Review

As per CRISIL reports, large-cap funds lost 1.80%, multi-cap funds gave 8.30% and short-term debt funds returned 5.90% in the last year. So, should you now sell all large-cap holdings and allocate the sale proceeds between multi-cap funds and short-term debt funds? Well, you must not.

Mostly, first-time investors attempt to figure out winners and losers by analyzing past returns. However, the financial planners ask to consider the portfolio as a whole. Family First Capital’s Founder and Managing Director – Rupesh Nagda says “The investor must initially find out whether his portfolio is widening in accordance with the common trend of the financial markets, after factoring in the asset distribution he began with.

Consider your asset allocation. When equity funds outperformance, the equity portion in your portfolio increases sharply, reserve some profits, and purchase the underperforming asset. To earn money from your investments, work on the old wisdom ‘Buy-low-sell-high’.

For example, in an increasing market, gold investments (ETFs (exchange-traded funds) or gold MFs) perform badly. Hence, in that situation, is it good to sell gold and purchase more equity? Its answer is No. Instead, you have to do the opposite i.e. cut equity and book profits rather than selling gold.

Founder and Managing Director of Axiom Financial Services, Deepak Chhabria says that while analyzing mutual fund schemes, figure out how they have worked out against their benchmarks and their peers. He also added that there will be stages of underperformance and investors must avoid taking corrective steps hurriedly.

Rebalance

Rebalance the asset allocation of your portfolio if it has changed. Sell the asset class which has gone up and then invest the proceeds in an under-represented one. A few investors also included more to the under-represented asset class to rebalance the portfolio.

The deviations from potential allocations should be crucial to permit a change. A deviation of over 15% is a perfect beginning. All rebalancing and reconstitutions exercises should be undertaken while considering tax and exit load implications in a way that advantages go beyond the cost, Fisdom, Head-Research, Nirav Karkera says.

Rebalancing also improves sub-segment allocations. For instance, your equity portfolio may have a 70:20:10 allocation to large, mid, and small-cap funds respectively. When the market becomes volatile, allocation to small and mid-cap schemes may fall. You would like to improve it when the deviation is sizeable.

Corrective Actions

While rebalancing the asset allocation, investors can opt for corrective actions like weeding out underperformers and presenting innovative products that show low association with current investments, thereby helping to improve risk-adjusted returns.

Underperformance must be considered in comparison to the benchmark and peers. Also, investors should consider style diversification. This is because sometimes specific investing styles may not function.

For example, value investing didn’t click from 2011-2019. The portfolios emphasizing quality didn’t pay off in the year 2021-2022. Strategies for different investments may work differently. So, maintain style or strategy diversification in your portfolios.

Loading on a specific investment style can affect the portfolio level when goes out of favor. If your equity mutual fund portfolio has comparatively performed more badly over the last two years than broad equity markets, possibly you have a low allocation to small and mid-cap funds and/or a value-emphasized investment strategy.

Don’t sell the scheme instantly during underperformance. Keep holding present units and stop including more till you have sufficient details on hand to take an exit decision, says Chhabria.

Schemes usually underperform when the fund manager changes, the investment premise goes wrong, the style goes out of favor, the investment process change, or the investment premise takes longer to play than expected, and the fund manager doesn’t walk the talk. Decide to exit when underperformance is not temporary.

Remove Leftovers

Usually, people invest in equity schemes via STP (systematic transfer plan). In this plan, a customer invests a lumpsum in a liquid fund and transfer a small and equal amount of money to equity funds. In some cases, when STP is finished and a customer transferred all starting corpus into the equity fund, a few residual units remain in the liquid fund due to an increase in these funds in the meantime.

It’s best to transfer those residual units to the equity fund and close the liquid fund account. Find any legacy investments in your portfolio. For example, age-old investments that you most probably have forgotten. These investments will make your portfolio statement appear full.

Also, assess the important hygiene factors like nominations and updated contact details for portfolio constituents. These factors are compulsory according to the new rules. If required, change the contact details and nominations to easily track and transmit assets.

DIY Investors Need to Work More

According to Chhabria, most investors end up blindly pursuing returns. Studies also reported that investor returns are much lower than scheme returns. DIY (do it yourself) investors need to prevent these biases as they might not have a sounding board as an advisor.

Jeevantika’s Chief Mentor and Co-Founder, Vijai Mantri asks investors to look inward. Rather than asking them the name of prospective winners in mutual fund schemes, they should ask if they’re investing sufficiently for their financial goals, or if they need to change their attitude towards investing.

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Is Mutual Fund As Risk-Free As You Think?

Fri, 24 Jun 2022 08:39:49 +0000

The Buyt Desk

Mutual Fund has been around as an investment option for a long time but was not as popular as it is today. Today, this investment product is well accepted as traditional investment products among investors, such as fixed deposits, gold, silver, etc. Thanks to mutual fund managers who carefully invest money in different equities and ensure you get a good return.

To make SIP mutual funds less risky, the mutual fund managers invest your money in various funds across asset classes, depending on the fund you have chosen. This is how they mitigate the risk of loss. Therefore, even when certain assets do not perform, your portfolio will be the least impacted. However, there are risks involved that you must be aware of to make an informed decision about investing in mutual funds.

Risk Involve With SIP Mutual Fund And SWP

The two major concerns of mutual fund investors are:

Will this investment fetch me a risk-free return?
Is the asset management company reliable?

As far as the credibility of the asset management company is concerned, the Securities Exchange Bureau Of India and other regulatory bodies are there to protect your rights. And the for the first concern, there are certain risks, such as:

Equity Or Stock Market Risk – The money you put into equities via a mutual fund is being invested eventually in public traded firms, thus, the risk that the stock market has is obviously there in the mutual fund as well.

Interest Rate Risk – A debt fund has a risk of interest rate. Bonds and stocks are exchanged in a similar manner, and their prices vary. Further, the bond movement and the economy’s interest rate are interlinked and work in inverse. That means as the economy’s interest rate rises, the bond values decrease as they both offer the same interest rate.

Things to Consider When Evaluating Mutual Fund To Avoid Risk

Mutual Funds come with certain risks. To avoid them, you must keep a few points in your mind.

Return – A fund managed by professionals has good back support. Such fund claims to give a minimum return of 12%. It is way higher than the interest rate offered by other financial products.

Factors Of Uncertainty – There are mutual funds present, giving you the option of regular investment of a fixed amount every month (SIP). In case you fail to deposit money in that account for a month or two, it would not affect your account functioning, unlike the recurring deposit or FDs, where missed payment means account closure. Consider that option.

Flexibility Of Surrender – Suppose you need a fund for buying a home or sending your child abroad for further education. If you borrow a loan from the bank, it will charge a whopping interest of up to 12% depending on your banking history. On the other hand, if you have a mutual fund bond that has given you significant gain, surrender the fund to get the needed corpus.

Conclusion – Mutual Funds are exposed to risk as various external factors control it. However, it also gives a return that no other investment products offer. But to reduce loss risk, diversifying investment portfolio is the mantra.

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How are Mutual Fund Investments Taxed?

Wed, 22 Sep 2021 04:21:20 +0000

The Buyt Desk

Mutual Funds(MF) are the flavour of investment in today’s world. People are slowly seeing the wide gap in return from the traditional investment avenues such as plain vanilla bank fixed deposit and mutual funds. If you invest in MF for a longer time horizon of 5 years plus you may earn a return of around 10-12% on your investments which is much better than small savings schemes like the Public Provident fund, Recurring Deposit or Fixed deposits. But the gains earned on mutual fund transactions are taxed under the capital gains tax.

Two Types of Capital Gains Tax

Long Term Capital Gain or Short Term Capital Gains Tax – it will depend on how long you have held the mutual fund units and in how much time have you redeemed it. If it is an equity-oriented mutual fund then to save more tax you need to hold it for at least a year. The units sold after a year will attract long term capital gains tax of 10%. The gains of up to Rs 1 Lakh is exempted from tax but the gains above Rs 1 lakh will be taxed at 10%. If the investor redeems the MF units within a year then short term capital gain tax at the rate of 15% will have to be paid by him/her. But the tax rate changes with the type of mutual fund category. A debt-oriented MF is taxed differently. For debt, the MF scheme holding period is 3 years. If the units are redeemed within the 3 years it will attract short term capital gains tax. The short term gains from Debt Mutual funds will be added to the investor’s income and he/she will be taxed as per their income tax slab. On the other hand, if the Debt Mutual Fund is redeemed after 3 years then a tax of 20% with indexation benefit will be calculated on your gains.

Switching Of Mutual Funds

You may not want to invest a lump sum amount in one go in a mutual fund scheme. This is when the Systematic Transfer Plan (STP) comes to your rescue. An STP enables the transfer of money from one scheme to another. Let’s say you park your lump sum in Scheme A which could be a debt fund or a liquid fund and decide to STP your money to Scheme B gradually. You may think that you are not earning any gains in this process as no money comes to your account. But remember that for money to be transferred to scheme B the units are getting redeemed and re-invested. You are reinvesting your money and whenever there is redemption for reinvesting, every time gain or loss will be considered. You will have to either take a consolidated transaction statement from your Mutual Fund company or pay Capital Gains Tax by taking a statement of gains from the Registrar and Transfer Agent of the company i.e. RTA which can be CAMS or Karvy. If money is transferred by withdrawal from the debt scheme, then taxation of the debt scheme will be applicable and if money is withdrawn from the equity scheme then tax rules of equity will be applicable.

Dividend Income

According to the new rules of income tax, now whenever investors get a dividend, it will be added to their income. And tax will have to be paid according to the tax slab. Earlier companies used to pay dividend distribution tax on dividends. But now it will be added to the total income of the investors. In the budget presented on February 1, 2020, Finance Minister Nirmala Sitharaman had removed the Dividend Distribution Tax. If you earn Rs 5000 through dividends, then TDS will not be deducted. But on dividend income above Rs 5000, TDS will have to be paid at the rate of 10%.If the investor has not shared PAN information or your PAN is not linked with Aadhaar, then 20 per cent TDS will be levied on it.

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5 Things to Know Before You Invest in Mutual Fund

Sun, 27 Sep 2020 04:26:16 +0000

By Dheeraj Agrawal, Communication Professional

Investing in mutual funds is “right” but the big question is which mutual fund? Many old investors too often ask the question whether the schemes of their mutual fund portfolio are correct or not. Among thousands of schemes of dozens of mutual fund companies, choosing the right scheme for yourself is as difficult as choosing the right mobile phone in your budget. But we are going to make the selection of mutual fund schemes easier for you. All you have to do is, before finalizing the scheme, find the answers to these five questions which we have prepared for you.

1) What is your investment goal?

First of all, find the answer to the question of why you are making this investment because every investment has a goal in financial planning. It may be that you want to invest to go abroad or to buy a car or a house. Your financial goals may also include the cost of higher education for children or to save money for retirement. Or do you want to invest in mutual funds just to save tax. Remember that the duration of an investment may vary for each financial goal. And this will decide whether your investment in mutual funds should be for short term or for long term.

2) How long you can invest?

When you have set your investment target then it will be easy for you to find out how long you have to invest in mutual funds. If your plan is to make provisions for the down payment for your home, then it is possible that you will remain in investment for 3 or 5 years. But if you are planning to raise money for retirement, then the investment period can be 10, 15, 20 years or even more according to your age. The decision of which mutual fund is right for you will largely depend on the answer to this question, how long you can remain in your investment.

3) How much risk can you afford to invest?

When you keep your investment period longer, you can also take a bit more risk on it. But if the investment period is short then it would not be wise to take risks. It is also necessary to remember that the financial goal of investment will be achieved only when your invested capital is safe and regular returns are received. There are many types of mutual funds and the risk varies. For example, risk is higher in equity mutual funds and less in debt mutual funds. Sector mutual funds are also more risky in equities, while balanced mutual funds carry less risk. The choice of the right mutual fund for you will depend on the extent to which you are comfortable taking risk in your investment. For example, if you are 30-35 years old and are investing for retirement, then you can take more risk. But if you are 50-55 years old, then it will not be right for you to take risk.

4) Which category of mutual fund is right for you?

By now you must have decided how long you can invest and how much risk you can take. To make mutual fund selection a little easier, we are giving you some tips:

If you can invest for 5 years or more and can take more risk, then you choose any equity mutual fund category. These can be index funds or diversified mutual funds.
If you can invest for 5 years or more but cannot take much risk, then you choose the equity-oriented hybrid mutual fund category. Hybrid funds are also called balanced funds.
If you want to invest for less than 5 years then debt oriented hybrid mutual funds will be right for you or pure debt mutual funds.
If you want to invest for the purpose of saving tax, then you have to choose Equity Linked Savings Scheme i.e. ELSS Fund. These are equity funds in which your investment is locked-in for 3 years and you can get a tax rebate on investments up to Rs 1.5 lakh annually.

5) How will you reach the right scheme of mutual fund?

After finalizing the category of mutual funds, now it is the turn to finalize the scheme. For this, you can examine the scheme on some parameters such as past performance, its asset size, expense ratio, rating and performance in a volatile market. Although the previous performance is not a guarantee that the scheme will give good returns in the future, it gives an idea whether the fund meets your expectations or not. Also remember that as the asset size of a fund scheme increases, its expense ratio decreases. And lowering the expense ratio means better returns. Therefore, choose a scheme whose asset size is at least Rs. 700-800 crores.

We not only hope but believe that with the help of the aforementioned 5 mantras, you will be able to hit the bull’s eye. So, we wish all of you a very happy investing.

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