Skip to main content

Long Term Wealth Creation with Mutual Funds

Download Tax Saving Mutual Fund Application Forms

Invest In Tax Saving Mutual Funds Online

Buy Gold Mutual Funds

Leave a missed Call on

94 8300 8300

 



Mutual funds combine fund management expertise, reduction of volatility and lower costs to give returns to investors. While some investors use mutual funds for a regular source of income, there is a large number of investors who invest in mutual funds for creating wealth.


Here are some basics about which types of mutual funds could be used for building a large corpus over the long run:

 
Debt funds


As the name suggests, these are the funds which mainly invest in debt instruments like government securities (gilts) and other bonds, treasury bills, certificates of deposit (CDs), commerc ial papers (CPs), money market instruments, debentures, etc. If you notice, at the time of investing itself in each of these instruments, an investor usually has some idea about the type of return he/she may get either after a fixed interval (like each year/half-year/ quarter) or at the time of maturity. So naturally debt schemes also give a return that one could reasonably guess while investing.

The instruments in which these funds invest usually do not show much volatility on a daily basis, as compared to stocks. As a result, debt funds also show less volatility compared to equity funds and bring stability to one's portfolio.


In India, investments in debt funds usually enjoy indexation benefits, which in other terms is the government's way of compensating an investor from the loss that accrues to his/her investments in debt funds because of inflation in the country. This is one of the advantages for debt funds that helps investors build we a l t h t h ro u g h t h e s e schemes because, to build wealth, one needs to grow money over the long term and the same should beat the rate of inflation over that period of time.


Within debt funds, there are various types: Liquid funds, long-, medium- and short-term bond funds, gilt funds, fixed maturity plans, etc. Of these, liquid funds are the ones in which you can keep your money if your investment horizon is from a few days to, say, about six months. These are usually used to park your money for the short term. These are not the funds that one can use to build long-term wealth. Compared to liquid funds, returns from other types of debt funds are usually higher.


Equity funds


Equity funds invest most of their corpus in stocks. These are more risky schemes than debt funds and usually also show a higher level of volatility. But financial planners and advisers always bank on equity funds for long-term wealth creation. This is mainly because, going by historical data, stocks have always given returns that have beaten the rate of inflation in the long run. So when it comes to building wealth, equity funds are the preferred investment vehicles compared to debt funds.


In India, all equity funds also enjoy exemptions from long-term capital gains tax, which make these funds even more eligible to grow one's wealth. Financial planners and advisers say that if investors have the risk appetite and have time on their side, then they should always opt for equity funds over debt funds for wealth creation.


Within equity funds, there are various types of schemes:

Diversified , large-, mid- and smallcaps, equity-linked savings schemes (ELSS), sectoral funds, etc.

Of these, large-cap schemes usually show less volatility than mid- and small-cap funds as they are more risky than large-cap ones.


For wealth creation, going by the risk-taking ability of each investor, financial planners and advisers suggest a portfolio of funds that is usually a mix of diversified, large-, mid- and smallcap schemes.
An ELSS is often mixed with other types of schemes to give some extra tax advantage since these funds are approved by the government for tax rebates under certain conditions.


On the other hand, sectoral funds — which invest in a particular sector like IT, FMCG, banking, etc — are never used for long-term wealth creation. This is because a particular sector never shows a secular upward movement but displays a more cyclical nature.


Other types


There are some other types of funds also, like monthly income schemes (MIS), which are mainly used for generating regular income. And then there are balanced funds. Although, ideally, these should have equity and debt in equal ratio, most balanced funds have at least 65% equity to take advantage of income tax rules. They are more volatile and risky than they should be, and are not the ideal vehicles for building wealth.

The quantum of dividend shall be Rs 0.0389 per unit. The record date has been fixed as April 03, 2014.

For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call

Leave a missed Call on 94 8300 8300

Leave your comment with mail ID and we will answer them

OR

You can write back to us at

PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest Mutual Funds Online

Invest Any Mutual Fund Online

Download Mutual Fund Application Forms from all AMCs

Download Mutual Any Fund Application Forms

---------------------------------------------

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Franklin India Bluechip
      4. ICICI Prudential Top 100 Fund

B. Large and Midcap Funds Invest Online

      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
      4. Birla Sun Life Front Line Equity Fund
      5. Franklin India Prima

C. Mid and SmallCap Funds Invest Online

      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
      5. Birla Sun Life Dividend Yield Plus
      6. SBI Emerging Businesses Fund
      7. HDFC Mid-Cap Opportunities Fund
      8. ICICI Prudential Discovery Fund

D. Small and MicroCap Funds Invest Online

      1. DSP BlackRock MicroCap Fund

2.Franklin India Smaller Companies

E. Sector Funds Invest Online

      1. Reliance Banking Fund
      2. Reliance Banking Fund
      3. ICICI Prudential Banking and Financial Services Fund

F. Tax Saver Mutual Funds Invest Online

1. ICICI Prudential Tax Plan

2. HDFC Taxsaver

      1. DSP BlackRock Tax Saver Fund
      2. Reliance Tax Saver (ELSS) Fund

G. Gold Mutual Funds Invest Online

      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund
      4. Birla Sun Life Gold

H. International funds Invest Online

1. Birla Sun Life International Equity Plan A

2. DSP BlackRock US Flexible Equity

3. FT India Feeder Franklin US Opportunities

4. ICICI Prudential US Bluechip Equity

5. Motilal Oswal MOSt Shares NASDAQ-100 ETF

Popular posts from this blog

Rs 14,000 Crore worth of tax free bonds coming soon from NHAI , PFC

  NHAI, PFC file prospectuses, coupon rate not yet decided MORE debt investment options have opened up for investors with AAA rated tax-free bonds worth over Rs 14,000 crore lined up. The National Highway Authority of India ( NHAI ) and Power Finance Corporation ( PFC ) are offering Rs 10,000 crore and Rs 4,033.13 crore worth of tax-free bonds, respectively, as per prospectuses filed with the Securities and Exchange Board of India (Sebi). Of a Rs 5,000 crore issue by PFC, Rs 966.87 crore has already been raised through private placement on September 28 and November 1. Tax-free bonds give investors tax-free return on any amount invested. In another kind of bonds, the long-term infrastructure bonds, investments up to Rs 20,000 are tax exempt, that is this cap amount can be deducted from the taxable income. Accordingly, the NHAI prospectus has clarified that only the amount of interest from -and not the actual investment on -its new bonds will be tax-free. "NHAI's publ...
Read more

Change in Fund Manager for some of HSBC Mutual Fund Schemes

Buy Gold Mutual Funds Invest Mutual Funds Online Download Mutual Fund Application Forms Call 0 94 8300 8300 (India) However, this facility is only available to Unit holders who have been assigned a folio number by the AMC.   HSBC Mutual Fund has announced that the below mentioned schemes shall be managed by the new fund managers as stated in the table. The effective date will be July 02, 2012.   Amaresh Mishra 's will be Vice President and Assistant Fund Manager. Having done a Post graduate diploma in Business Management and Bachelor of Chemical Engineering, he has over seven years of experience in Equities and Sales.   Mr. Piyush Harlalka's designation shall be Vice President- Fixed Income. Qualified as a C.A., C.S. and holding M.B.A.( Finance degree), he has over six years of experience in Fund management and ...
Read more

How EEE and EET Tax affect Retirement Investments

  An important factor while choosing a financial product is its taxation , and for retirement savings, this is even more important as the sums involved are usually life-long savings. Here's a look at the current tax treatment of three major long-term retirement planning products, which are - Employees' Provident Fund (EPF), Public Provident Fund (PPF) and National Pension System (NPS). EPF The tax treatment is EEE, which means your money is exempt from taxes at the time of investment, accumulation and withdrawal. At the time of investment, the tax deduction is under the limit of section 80C of the Income-tax Act , which is currently Rs 1.5 lakh. Partial withdrawals are also tax-free if made after 5 years of continuous service. If withdrawals are made before 5 years of service, 10% tax will be deducted at source. Exceptions have also been provided for transfer of amount and conditions wherein the subscriber is unemployed for more than 2 months or the loss of job was beyond th...
Read more

Personal Finance: You can insure your wedding

But luck may not always be on your side. With the frequency of such attacks, as also other risks and unforeseen accidents growing, a wedding insurance is something you may want to look at if a marriage is being planned in the family. Event insurance plans like this is still in its nascent stages due to low awareness. And given the sacred nature of the ritual, nobody wants to discuss or think negative. But as wedding spends and risks grow, it makes sense to cover the potential monetary loss. The policy in those countries even covers the loss of the wedding ring, the wedding gown not reaching on time and even the expenses/loss due to late or non-appearance of the photographer which may mean staging the event once again for the photograph. In India, most insurance companies — including ICICI Lombard General Insurance, Oriental Insurance, Bajaj Allianz and National Insurance — offer wedding insurance. The policy is tailor made to individual requirements and needs. The sum insur...
Read more

DSP BlackRock MidCap Fund

Best SIP Funds Online   HOW HAS DSP BlackRock Small & Mid Cap Fund PERFORMED? With a 10-year return of 14.61%, the fund has outperformed both the category average (12.34%) and the benchmark (10%) by a good margin. Should you invest in DSP BlackRock Small & Mid Cap Fund? This fund invests predominantly in mid-cap stocks but takes a sizeable exposure in small-caps as well. The focus is on nascent companies with high growth potential. The fund manager places emphasis on quality and avoids inferior businesses even if these look tempting from a valuation perspective. Over the past year, the fund portfolio has grown, having added to some of the underperforming sectors like chemicals and healthcare. Its portfolio churn has come down significantly. The heavily diversified portfolio is run completely agnostic of its benchmark index— most bets are from outside the index—which can at times lead to bouts of underperformance as seen in the recent years....
Read more
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now