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| Mutual Funds, the globally proven investment avenue, have schemes to suit almost every investment need and it is increasingly recognized that investing through Mutual Fund is one of the most appropriate and safest ways of Wealth Creation. Due to its professional management, diversification, convenient administration, low costs, flexibility choice of schemes, well regulated, transparency, return potential, liquidity and tax benefit, Mutual Funds are becoming highly popular saving instruments. |
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| Three Common Investment Goals |
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- Retirement
Most individuals buy mutual funds for long-term goals, especially retirement. It is estimated that retirees will need 70 to 80 percent of their final, pre-tax income to maintain a comfortable lifestyle in retirement. If you plan to retire at the age 65, retirement savings should last for at least 17 years, since the average life expectancy for a 65-year-old is 82, and continues to rise.
- Education
Many parents and grand parents use mutual funds to invest for children's college education. Your time horizon is an essential consideration when investing for education if you start when the child is born, you have 18 years to invest. However, if a child or grandchild is in your future, the time horizon can be lengthened by investing now.
- Emergency Reserves and Other Short-term Goals
Emergency reserves are assets you may need unexpectedly on short notice. Many investors use money market funds for their reserves. Money market funds alone, or in combination with short-term bond funds, can also be appropriate investments for other short-term goals.
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| Advantages of Investing in Mutual Fund |
- Professional Management: Mutual funds are managed by professional fund managers who regularly monitor market and economic trends for taking investment decisions. They also have dedicated research professionals working with them who make an in depth study of the investment option to take an informed decision.
- Diversification: Diversification reduces risk contained in a portfolio by spreading it. It is about not putting all your eggs in one basket. As mutual funds have huge corpuses to invest in, one can be part of a large and well-diversified portfolio with very little investment.
- Convenient Administration: With features like dematerialized account statements, easy subscription and redemption processes, availability of NAVs and performance details through journals, newspapers and updates and lot more; Mutual Funds are a sure convenient way of investing.
- Low Costs: Mutual funds have a pool of money that they have to invest. So they are often involved in buying and selling of large amounts of securities that will cost much lower than when you invest on your own.
- Liquidity: One of the greatest advantages of Mutual Fund investment is liquidity. Open-ended funds provide option to redeem on demand, which is extremely beneficial especially during rising or falling of Markets.Transparency, Flexibility, Choice of Schemes and Regulated: Indian Mutual fund industry also presents several other benefits to the investor like: transparency - as funds have to make full disclosure of investments on a periodic basis, flexibility in terms of need based choices, very well regulated by SEBI with very strict compliance requirements to investor friendly norms.
- Tax Benefits: Investment in mutual funds also enjoys several tax advantages. Dividends from Mutual Funds are tax-free in the hands of the investor (This however depends upon changes in Finance Act). Also, capital gain accrued from mutual funds investments for period of over one year is treated as long term capital appreciation and is taxed at a lower rate of 10% without benefit of indexation or 20% with benefit of i
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