Welcome to Sodhani Investments
To earn money is never easy .And even many financial products available in market, we always stuck with a pressing question that where to invest money?
So when you set financial goals for yourself and looks for a product which can fulfill you financial goals then mutual funds scheme are always a best choice.
Mutual fund is the best product which can beat inflation and can match your financial goals keeping investment horizon and risk profile in consideration.
There are different types of mutual funds but basically 3 majors are :-
An Equity fund is a mutual fund which invests minimum 65% of investment in equity and balance 0% to 35% in debt securities like government bonds, treasurer bills etc. It generally gives high returns compare to other funds as it invest majorly in equities but also higher risk product. As per SEBI,there are 7 types of Equity funds.
If you are a high risk tolerance investor than you should invest in equity mutual funds to earn extra returns over your investment and to achieve your financial goals. Its always favorable for long term horizon which is more than 5 years.
A hybrid fund is a mutual fund which invests mainly in 2 asset classes i.e equity and debt . The ratio of equity and debt enables a hybrid fund to give returns similar to those generated by equity funds but lower risk levels due to debt component. As per SEBI, there are 7 types of Hybrid funds.
A debt fund is a mutual fund which invests a majority of its assets in debt and money market securities. Debt funds are relatively lower levels of risk.. As per SEBI classification, there are as many as 16 types of Debt Funds.
So when you are risk –averse, you should look for Debt mutual funds .As it is compose of Treasury bills, government bonds, corporate bonds type instrument so having very less risk and your return is the interests earn over it. Debt funds are generally favorable for short term horizon which is less than 5 years.
When you invest in equity mutual funds and held for more than 1 year then the gain over it is known as long term capital gain and will tax 10% over profit after exempted 1 lakh profit per year.
In Debt mutual funds when investment held for more than 3 years then it qualify for long term capital gain and tax is 20% with indexation benefits.
In equity mutual fund when held for less than 1 year than it is Short term capital gain and it tax as 15% over profit.
In debt mutual fund when held for less than 3 year than it is Short term capital gain and it tax as per income tax slab.
There are 2 options to invest in Mutual Funds-
1) Dividend Option- Investors ask mutual fund house to redeem their dividend earn over mutual fund investment. So fund house don’t re invest your profit back to mutual funds.
2) Growth Option-By opting Growth option ,Investors allow mutual fund house to re invest their dividend to back into funds.
So In dividend option investor keep getting profit in form of dividend .Also in case of requirement he can opt for SWP(Systematic Withdrawal Plan) where he can redeem a certain amount every month as per requirement. But higher amout of SWP withdrawal may reduce the principal amount too.
Also investor can book profit time to time by redemption process .It will payout the redeem amount to client bank account.
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