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Start early to gain from compounding

 



For banking customers who are used to saving through recurring deposits (RDs), a systematic investment plan (SIP) is almost its equivalent in the mutual fund space. In an SIP, a pre-fixed amount of money is invested in the selected mutual fund scheme on a particular date every month.

 

The process has been made simple by deploying banking technology . This uses electronic clearing service (ECS), which allows you to invest through an SIP without human intervention. Against the money that you invest in the SIP mode, the fund house will allot some units of the scheme in which you have given your mandate to invest.

If you invest over the long term, you get to enjoy the benefits of rupee-cost averaging. You also get to enjoy the power of compounding. Most of the mutual fund houses have SIP calculators on their websites which you can use to calculate how much your corpus can grow over the years as you invest a fixed amount every month.

To enjoy the power of compounding, you should start early and continue with your investments. The earlier you start, bigger the corpus you can build. For example, if you invest Rs 5,000 every month for 20 years and you get an average annual return of 12%, your corpus at the end of the term will be nearly Rs 49.5 lakh. However, if you were five years late, your total corpus will be about half, at about Rs 25 lakh. So start early to reap the benefits of compounding.
Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015

1.ICICI Prudential Tax Plan

2.Reliance Tax Saver (ELSS) Fund

3.HDFC TaxSaver

4.DSP BlackRock Tax Saver Fund

5.Religare Tax Plan

6.Franklin India TaxShield

7.Canara Robeco Equity Tax Saver

8.IDFC Tax Advantage (ELSS) Fund

9.Axis Tax Saver Fund

10.BNP Paribas Long Term Equity Fund

You can invest Rs 1,50,000 and Save Tax under Section 80C by investing in Mutual Funds

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