![]() ![]() As a result, this fee increases the cost of investment. This charge is expressed in percentage and is known as expense ratio. Expense Ratio: Fund houses levy a fee for their portfolio management services.Therefore, prospective investors must evaluate their risk appetite before investing in a mutual fund scheme. As afore-mentioned, they are exposed to market risk, credit rate risk, and liquidity risk. Risk Appetite: All mutual fund investments come with associated risks.These are the following pointers that you must consider before investing in such funds. With this investment, investors can claim a deduction of up to ₹1.5 lakh under section 80C of the Income Tax Act, 1961. Pro Tip: Investing in an ELSS through a systematic investment plan can act as a tax-saving instrument. Likewise, debt-oriented hybrid funds are taxed like debt funds. Hybrid Funds: Equity-oriented hybrid funds are taxed as pure equity mutual funds.Debt Funds: With debt funds, short-term gains get taxed as per one’s tax slab, while long term gains get taxed at 20%.Moreover, gains exceeding ₹1 lakh are taxed at 10%. On the other hand, long-term capital gains up to ₹1 lakh in a year are exempt from tax. Equity Funds: For equity funds, short-term capital gains are taxable at 15%.We have mentioned the tax liability based on fund types here. Tax rules are the same in SIP mutual funds. Tax Benefits: Before investing, it is important to know the SIP tax benefits. Thus, you can reap benefits from various mutual funds at a time.ĥ. Simultaneous Investments: As one can invest in SIPs with just ₹500, one can invest in multiple funds simultaneously. Therefore, one’s investment will generate earnings not only on that initial investment amount, but on the interest earned subsequently as well.Ĥ. A systematic investment plan operates on the principle of compounding, which takes place when profits earned on an investment are reinvested, thereby increasing potential returns. Benefits of Compounding: This is one of the top benefits of SIP investment. As a result, investors can navigate market fluctuations and make their investments averse to volatility.ģ. Similarly, one will buy lesser units during an upswing market. Rupee Cost Averaging: Rupee cost averaging is a unique feature of SIPs as an investor can buy more units when the market is low. Disciplined Investing: When investing via SIPs, one need not analyse the market or determine a suitable time to invest as the SIP instalment amount gets auto-deducted from your account and goes into mutual funds.Ģ. Mentioned below are the benefits of a systematic investment plan:ġ.
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