WHAT IS MUTUAL FUND?
Let's see.
investment always has been having fixed
deposits buying gold or investing into
real estate but there is another form of
investment as well and that is mutual
fund .
So let us see what is mutual fund
many individuals coming together is
mutual fund is nothing but money so many
individuals pooling in money for a
common purpose is called a mutual fund.
the purpose here is to benefit from
the capital market now these individuals
don't have the required knowledge not
the time to manage this pool but they
want to benefit from the capital market
and so an asset management company
appoints a fund manager to take care of
this pool this fund manager is a
knowledgeable professional who
continuously monitors the market and
buys corporate or government bonds
Treasury bills stocks and various kind
of deposits to satisfy the investment
objective of this fund there can be
various investment objectives but one
mutual fund would be driven by only one
investment objective and so for each of
such objective which depends upon your
risk-taking capacity the time horizon
that you have for your investment a
mutual fund is available and you should
invest into that kind of mutual fund .
Mutual funds are broadly divided into
Three categories first is equity for
people who want to invest only into
equities and get the maximum benefit of
the stock market.
another is dead for people who want to
invest only into debt and third is
balanced fund for people who want to
have mix of both equity as well as dead
so what we've seen so far is how a pool
of money managed by a knowledgeable
professional is called a mutual fund.
each mutual fund will have an investment
objective we've seen the broader
classification of mutual funds and how
for any kind of investor there is a
mutual fund that is available.
WHAT IS E.L.S.S?
ELSS is a diversified equity mutual fund
where majority of the corpus is invested
into equities investor enjoys two
benefits one is he gets market edge for
his investment as well as he saves tax.
under the section ATC if you start a si
P under ELSS each investment would be
locked in for three years from the
respective date of investment ELSS come
in two options one is growth another
dividend in growth you get a lump sum
amount after completion of the lock-in
period in the dividend option the
investor gets dividends whenever they
are announced by the mutual fund house
even in the lock-in period returns under
ELSS.
a completely tax-free there is no
maximum limit of investment into ELSS
but tax exemption is available for a max
of only 1.5 lakhs.
let us see what are
the advantages of ELSS it has low
lock-in period that is of three years as
compared to the other options available
for tax saving under the SEC's sheet ATC
PPF has a lock-in period of 15 years
national savings certificate has a
lock-in period of six years and tax
saving FDS have a lock-in period of five
years so ELSS has high liquidity out of
all the tax saving options available
under the section ATC returns from ELSS
and PPF are tax-free but ELSS
deliver better returns because of its
market edge returns from LSE and FD is a
taxable and hence ELSS gives better
returns the best advantage of ELSS
is that it serves as a gateway to equity
investment if you have some inhibitions
about investing into mutual funds ELSS
could be your first try if you invest
into the market directly.
indirectly a slight riser slight fall
into the market can trigger wrong
selling decisions so a locking period of
three years in ELSS keeps you tied down
and you can see returns over a period of
three years history of past 20 years
shows that ELSS has delivered the best
returns out of all the options available
for tax saving under the section 80 see
what we have seen so far ESS is the best
investment option under Section 80 see
try analysis if you have never invested
into the market directly or indirectly
to share your inhibitions do your tax
planning at the start of the year to
avoid any time pressures if you plan to
invest under ELSS go the SI P way to
average out the market fluctuations.
THAN YOU..
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