Mutual Funds

Investments

(Mutual Funds / ULIPs)

Reasons to Invest in Mutual Funds

Invest for regular interest income:

As a conservative investor, if you're seeking consistent income generation in the short term, Mutual funds serve the purpose. Besides providing regular income, the schemes offer stability and high liquidity. So, when you allocate a section of your portfolio to these schemes, you can use a systematic withdrawal plan for building a stream of income flows. Mutual Fund Dividends are icing on the cake.

Disciplined investing:

Mutual funds encourage investors to invest over a short to long period of time, which is essential to wealth creation. Furthermore, the advantages of mutual fund systematic investment plans or SIPs is that they encourage investors remain disciplined to meet their various financial goals. Mutual fund SIPs help investors to maintain a disciplined approach to investment.

Tax advantage:

Tax advantages of mutual funds is one of biggest benefits of investing in mutual funds compared to many traditional fixed income investments. In equity funds, short term capital gains (held for less than 12 months) are taxed at 15% and long term capital gains (held for more than 12 months) are tax exempt up to Rs 1 lakh in a FY and taxed at 10% thereafter (excess of Rs 1 lakh of capital gains). In non-equity funds, short term capital gains (held for less than 36 months) are taxed at as per your income tax rate and long term capital gains (held for more than 36 months) are taxed at 20% after allowing indexation benefits. Interest income from most traditional fixed income investment is taxed as per the income tax rate of the investors. For investors in the higher tax brackets, tax advantages of mutual funds is significant compared to traditional fixed income investments.

Risk Diversification:

Every stock is subject to three types of risk – company risk, sector risk and market risk. Company risk and sector risk are unsystematic risk, while market risk is known as systematic risk. Mutual funds help investors diversify unsystematic risks by investing in a diversified portfolio of stocks across different sectors. While individual stocks have both unsystematic and systematic risks, mutual funds are only subject to systematic risk or market risk.

Transparency:

Transparency is another advantage of mutual funds for retail and HNI investors. Mutual fund schemes disclose their Net Asset Values (NAVs) at the end of each business day; so investors are aware of the market value of their mutual fund units on a daily basis. On a monthly basis, mutual funds publish Monthly Fund Factsheets where the portfolio holdings (securities in a scheme’s portfolio along with weights) are disclosed for each and every mutual fund scheme. Investors have the information where the fund managers have invested on a monthly basis. In addition to portfolio holdings, monthly fund factsheets have useful information like returns compared to the scheme benchmark, risk ratios etc.

Unit Linked Investment Plan (ULIP) – Invest for Long-Term Savings, Awesome Investment Return and Tax Benefits

A ULIP investment has two parts. The first part is the premium to secure the life insurance cover and the second part goes into equity or debt funds to reap financial benefits as per the choice of investor depending on your future financial goals.

Benefits on investing in ULIP are:

Dual Benefits (Investment + Insurance):

ULIP investments are the only financial tool in our country that provides dual benefit of investment and life insurance. Customer need not to buy separate insurance and investment plans to secure their future, it saves time, money and efforts and helps you manage your finances better at a single place.

Best-in-Class Tax Exemptions - Zero LTCG Tax / Guaranteed Tax Savings Under sec 80C & 10(10D):

Investments made in ULIPs are eligible for tax deductions under Section 80 C of the Income Tax Act. An investor can claim up to ₹1,50,000 every year on his ULIP investments. Similarly, the returns that you get at the time of maturity of your ULIP policy is exempted from tax under Section 10D of the Income Tax Act. Not only that, but the amount received by the nominee upon the death of the policyholder is also exempted under Section 10 (10D) of the Income Tax Act. If you have any query on tax implications of ULIPs then call us or write to us at finanscorporateservices@gmail.com

Long Term Growth Benefits:

You can pay ULIP premiums for a long tenor and enjoy long term benefits. If you do so, your money is invested in the market for a long period of time thus giving you higher returns. You can use this money from the long term benefits of ULIP for specific purposes like children’s education, down payment of a home loan, etc., by planning it accordingly.

Flexible Investment Options:

ULIPs offer flexibility in terms of investment options. This flexibility is in the form of

►Fund Switch: You can move your investment between different funds such as equity, debt or balanced funds, depending on your risk appetite. In case you want to take high-risk on your investments, you can increase the investment portion in equity funds. However, at any point, if you feel you want to decrease your risks, you can switch your investments into debt or balanced funds.
►Top-Up Options: Top-up options allow you to invest more money in your existing savings.
►Premium redirection: Premium redirection offers flexibility to redirect your future premiums into different funds.

Transparency:

The ULIP charge structure, value of an investment and expected rate of returns, for the complete tenure of the policy are shared before you buy a product. It's always a good idea to understand the product you would be investing your hard-earned money into. Similarly, the annual account statement & quarterly investment portfolio along with the daily NAV reporting will ensure that you are aware of the status of your investment portfolio at all times.