Benefits of investing in a mutual fund

Benefits of investing in a mutual fund 2022

The Indian investment portfolio is a long-term investment in which the return is slightly lower, but the risk is lower and the secured capital is guaranteed.  All our parents, grandparents have adopted this investment method.  With these investments, fixed deposit has been the best option as it has significant returns and money in government banks or top private banks on the opposite side ie government securities are available or the risk due to brand value is less.  The new generation of thinkers in the age has increased the focus on alternative investment means of fixed deposit with new thinking.  

Benefits of investing in a mutual fund


Mutual funds have gained more popularity in recent years as an alternative to fixed deposits with the new risk weightage policy.  The importance of the FD as the most preferred long-term investment plan due to the results of mutual funds over the last two decades has now been lost due to mutual funds and other means of investment.  During the 2016 banknote ban, low FD rates led to an increase in the MF.  Apart from this, due to the availability of tax-advantage mutual funds, this popularity continued to grow.  Investors who could take less risk than offering higher returns with abundant liquidity opted for debt funds instead of FDs.

 ... So let's compare fixed deposits and mutual funds and see which investment option is the best even statistically?

Debt funds v / s fixed deposits

 In terms of risk, debt funds can be considered the closest to traditional fixed deposits.  The main purpose of a debt fund is to provide investors with a regular return on their investment.  So you also have to set your time limit to suit the fund.  You can get information about different debt funds and their terms directly from their respective fund houses, online or from a third party.  This information will help investors understand the profitability of the fund and your investment return in terms of interest rates.  These statistics and information will help you to get the most out of the market volatility along with the knowledge.


  The interest rate for FD is determined by the banks and the period you choose.  On the other hand, changes in interest rates lead to fluctuations in debt fund returns.  However, debt funds can offer reasonable returns compared to FDs in terms of capital growth and monthly / annual / regular income.  One of the advantages of FDs is that the market turmoil or any other factor will not affect the returns you get.  However, during a period of low interest rates in the economy, most debt mutual funds outperform fixed deposit returns.


 Short-term (less than 3 years) debt funds returns are taxed at your tax bracket rate.  Debt funds are taxed at 20% on long-term profits (3 years or more), including the added benefit of indexation.  The return tax of the fixed deposit on the opposite party will be charged according to your income tax bracket.


 No return equivalent to inflation


 Inflation reduces savings by devaluing the currency.  Inflation increases or decreases. Fixed deposit returns at a fixed rate i.e. it has a fixed rate of return.  Debt mutual funds, despite being a common risk, have the potential to return higher than the inflation rate from historical statistics.

Conclusion

 Mutual funds may not be the best investment option if you are looking for short term benefits. However, it provides better returns in the long run and can be used as both a medium term and a long term saving cycle.

(Disclaimer: The views/suggestions/advices expressed here in this article is solely by investment experts. www.Tradtips.com suggests its readers to consult with their investment advisers before making any financial decision.)

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