AAPKA BANKER

If you are investing for 3 years or more then must look at the benefits of investing in Debt MF. Debt MF offers better tax advantage, better returns and better liquidity over traditional Deposits.

Safety - Debt Funds have low credit Risk

Investing in Debt Mutual Funds are equally or more safe than any individual Fixed Deposits; but its daily NAV and interest sensitive price movement makes it fluctuate in its market value, sometimes. However if you are looking to invest in 3 or more years, such schemes offer better propositions .

Liquidity - Debt funds are highly liquid

Because of its Open Ended nature, units of such schemes can be redeemed anytime at the prevailing NAV. Generally such Debt funds have some exit load or charges if redeemed before 1 year or so. One should check exit charges before investing

Returns - Debt funds are better than bank FDs

It is said in every MF investment disclaimer, that past returns are not the guarantee for future performance. Still, historically if you check the returns of these schemes, you will find a performance better than traditional Fixed Deposits.

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Heading : Compare the Tax you save in a Debt MF Vs Bank FD
(if both giving same returns)

Invested Amt.

1000

1 Crore

No. of Years

03 Yr

10 Yrs

Years

Debt MF Returns

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FD Returns

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Net Savings in Tax Payment (for not investing in FD) ` {{ diff_debtfd }}

Assumption :

# Rate of Return/Interest assumed @8% | # Minimum Time Duration is 3 Years | # Investor Under Highest Tax Bracket - 30%
# Debt MF will attract Cost Indexation benefit of @20%, so an investor will save tax outgo even if rate of return is same with Bank FD.

It is advisable to keep your provisions for 5-6 months as an Emergency Fund in your savings account. What if you get better alternatives to keep such surplus? Look at these Liquid Fund Options.

Safety : Liquid Funds are also called a Money Market Funds as they invest in 1 day to 90 days securities available in the money market, like- T Bills, Commercial papers etc. Due to its nature of investing, such schemes do not fluctuate in their NAV unlike other Debt funds. Hence they are defined under a Low Risk category

Liquidity : Such schemes offer instant Liquidity. Like, if you have invested in such scheme through our mobile application section – MYPURSE, then you can redeem it with money transferred in as quick as 2 minutes. In normal case of redemptions you will get the money back in 24 hrs.

Returns : As compared to a savings account returns, Liquid funds offer much better returns. You must check the return table once to compare on your own

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How much should you have saved?

Start by estimating your costs for essential expenses

Monthly Expenses

Amount in Rs

Housing

Food

Health Care (including insurance)

Utilities (water, electricity, etc.)

Transportation

Personal Expenses

Debt Servicing (EMIs) & Investments (SIPs, etc.)

Total Monthly Expenses

You should have Rs. in any of the
‘Liquid Mutual Fund Scheme’ for your emergency requirements

Investing in Equity fund is just like participating in Business. Investing in good businesses has always been the most rewarding investments in last 30 years. Equity Mutual funds invest in the basket of well researched good companies, for above average Long Term growth.

Safety : Every listed company can be bought or sold from the stock exchange. The current performance as well as future expected performance of the company, changes the market price of its stock in the exchange. Hence its market price keeps going up or down on daily basis. Despite volatility, good performance fetch a better price, always.

Liquidity : Just like any other open ended Mutual Fund Scheme, equity funds can also be redeemed anytime. Of course , one should check the exit load and tax impact, applicable at the time of redemption. If redeemed after 365 days, then all the gains from an equity fund will be treated under Capital Gain

Returns : Returns from an Equity fund depends upon the Risk you are taking ! There are multiple type of equity funds which can be chosen according to your Risk profile and suitability. There are equity funds with higher reward with High Risk , moderate reward with moderate Risk etc.
Given below is the list of such equity funds , ranked in the category of their Risk ( High to Low) :

Sector Funds
Thematic Funds
Small Cap Funds
Mid Cap Funds
Mid & Large Cap Funds
Large Cap Funds
Multi Cap Funds Funds

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Check the impact of few extra returns in Long term

With an average ROI of % per annum and

Compounding Frequency

Investment Period

Will become

Mutual Funds offer a great plan by the name of SWP (Systematic Withdrawal Plan), which is specially designed for people seeking regular Income. You can safely opt for SWP of Rs 650 per lac per month from any of the stable Mutual Fund schemes under Debt or Hybrid Category

Safety : As you know Mutual funds work on the principal of transparency and daily NAV, hence it do not offers any guarantee. Hence all investors need to select the scheme according to their Risk profile, tenure and requirement, to get the best from a Mutual Fund. In case of SWP we suggest to select Dynamic Hybrid funds or Long Term Debt Funds to have a happy investment journey.

Liquidity : SWP is a regular withdrawal option under monthly, quarterly, six monthly or annual option. Besides this, you can withdraw from your basic investments also , as per the applicable Exit load ( if any). Technically there is no lock-in period under such plans.

Returns : It is seen that such Hybrid funds have delivered more than Bank FDs in past, and because of their smart exposure to equities, they have the potential to deliver more. It is advised to select Rs 600 to Rs 750 per month per lacs from such schemes, to avoid any dent on your basic principal.

Is there a better way to invest in a Tax saving Scheme- to save under Sec 80C ? Yes – ELSS ( Equity Linked Savings Scheme) offers so many advantage over traditional Tax Savings Schemes.

Safety : ELSS is a 3 year locked in product which invests all your money in a diversified equity basket. As compared to traditional Tax Saving Schemes, such funds do not offer any guaranteed returns, but are highly rewarding as compared to them. Those who understand the advantage of investing in Equities and are aware of its market risk, must choose ELSS as a Tax saving tool

Liquidity : Just like any tax saving schemes, ELSS is also locked in for a period. However its lock in period is much lesser than other traditional Tax Savings schemes. It is locked in for 3 years only and then it becomes a normal open ended diversified equity scheme.

Returns : You can check the scheme chart here and find yourself that ELSS has always been better rewarded in long terms , as compared to its other counter parts. So it is advisable to ignore the volatility part and go for an ELSS scheme to fulfil your Annual Tax savings requirements.

Check how much you can save

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Select your investment amount

Depending on your tax-slab, your savings under Sec 80

If you are in 5% Slab

If you are in 20% Slab

If you are in 30% Slab