Understanding Tax Mutual Funds Investments

[aloysiuscarl]

A mutual fund is basically a trust which through its various schemes safeguards the investments of small and big investors. Every scheme of each of these mutual funds has different terms and conditions, by nature they are not tax saving instruments. However, investment products in these funds may offer tax savings.

ELSS schemes which are commonly known as tax mutual fund is a category where equity and equity related instruments are invested. Investment up to 1 lakh is tax exempted under section 80C. However, these schemes have a lock in period of 3 years before which you cannot withdraw.

In the Growth option of ELSS scheme, the investor does not get money during the investment tenure. He gets the entire lump sum amount at the time of maturity. On the contrary dividend option of tax fund has two choices and they are:

• The investor can either cash on the dividends
• The Investor can opt for dividend re-investment option.

The choice of growth or dividend options solely depends upon your priorities. Just by going through the track records does not mean that you have got the best options.

Mutual Funds in India have some quantitative measures that you should consider to evaluate the best option for you. These are:

• Expense Ratio - This ratio points to the expenses of funds annually, including the administrative and management cost.

• Sharpe Ratio - This ratio works as an indicator that your returns are either due to smart investing decisions or due to excess risk. Remember, higher Sharpe Ratio is always better.

• Alpha Ratio - It is an indicator of risk relative to the benchmark Index. If the alpha is more then it is always better for an investor.

• R-squared - It is method to measure the percentage of an investment's movement.

Online accessibility has created great opportunities to manage your account easily. You can sell and redeem units online without any hassle. Having an access to your account 24/7, no manual filling of application form and keeping a track of investments 24/7 are few of the benefits of choosing online investments.
Mutual funds in India are gaining grounds and has become one of the most popular choices for investing money. The flexibility, diversification, professional management, less risk, easy to redeem are all few of the benefits of mutual funds.

[MANOLO]

A mutual fund is basically a trust which through its various schemes safeguards the investments of small and big investors. Every scheme of each of these mutual funds has different terms and conditions, by nature they are not tax saving instruments. However, investment products in these funds may offer tax savings.