By Mukesh Mehrotra,IFA

Financial Consultant and Faculty and Trainer –Banking Financial Services and Insurance and Soft Skills

Saving through Mutual Funds

Generally Savings is taken as the residual money left after spending

every month.

As per principal of Financial Planning Savings is the money you need to spare every month for your future needs like Education of Child, Marriage and other necessary or contingent expenses, for buying Home ,Car etc. so that these expenses may not affect your financial health in future or we can say savings is a provision for future expenses

So the amount left after savings may be comfortably spent without any worry about future expenses.

It is said that your Salary provides you just Bread-n Butter but it is the prudent investment of the small amount you save which creates wealth for you.

What is Savings

Generally savings is put in Banks FD,RD,in Government Schemes like

NSC, PPF, Bonds etc.

LIC is also some time sold a savings product but practically it is Risk Management product.

Property require large capital with inherent risk.

Gold is another product but after development of Capital Market ,it is no more an investment product rather it is now a consumption product.

Equity market require lot of knowledge and timely action for sale –Purchase, which is not possible for Active Earners.

How the Savings is Invested

The money you saved after sacrificing your expenses

or desire should be put in some Financial Product which give you sufficient money at the time when future expenses are to be done.

So definitely it should give you a return which should be more than the inflation or Cost escalation so that the money saved may not fall short of the requirement at the time when expenditure is to be done.

If we leave the govt. declared inflation figure aside we find that every time we go to the market we need to pay high rates as compared to previous purchases.

What is investment

It is a rule High Risk –High Return and Low risk Low Return So, investment is done looking to the individuals risk

return expectation All the traditional products like FD /RD/Bonds/PPF fall in

the category Low Risk-Low Return. Return means net cash in hand not the rate mentioned on

instrument. The effective return on the traditional instrument is always subjected to Income Tax and thus our return happens to be lower depending on our Tax slab rate i.e.10/20/30%

The return on these instruments is dependent on RBI Monetary policies

What is Return

Liquidity refers to the ease and speed with

which I can convert my asset into cash.

So ,in case you need funds and your investment does not give you money in time of need How you will feel ?

All the traditional products are not liquid except Bank FD where you can get money by paying some charges (which will again reduce your return)

Liquidity

Presently the Situation is very pathetic . Traditional Investments are not giving returns

sufficient to meet the increasing cost and instead of increasing your Capital may practically reduce.

To invest in High Risk –High Return assets is not possible for a common man as either he do not have large amount of money or do not have risk bearing capacity or do not have Knowledge/Expertise/Time to invest and manage Equity Shares.

Present situation

So where a normal man with Small investible

Surplus with reasonable risk appetite invest.

?A Billion Dollar Question

Solution to all these issues

is investments in

Mutual FundsMutual Funds are available for every kind of

investor Big or SmallHigh Risk Investor as well as Low risk investors

Mutual Funds collects money from investor

which may be as low as Rs.500/-per month. The money so collected is invested in Capital

market in Equity Shares and Debts (Bonds) by Fund Manager, who has the knowledge of Working of Markets and takes decision to buy and sell securities.

The income generated is distributed to the investors in the form of Dividend,Appreciation in NAV ,Bonus.

What is Mutual Fund

How Mutual Funds

Works

Mutual Funds are operated by Asset Management

Companies formed as per provisions of Company Law. Presently there are almost 55 MF AMC ,some of which

are ICICI, HDFC, IDFC, Reliance , Axis, Kotak, Frankline Templton, DSP Blackrock, IDFC .

These AMC can not work at their own wishes but needs to follow rules and regulations prescribed by SEBI( Security Exchange Board of India )which is a regulator of Capital Market

They have to follow Code of conduct prescribed by AMFI Mutual Funds are regulated by SEBI and RBI

Mutual Fund – Well Regulated

Advantage in MF Investment

1. Converts Savings into Assets and Beats Inflation2. Convenience of Investing Small amounts via SIP route3. Potential for Higher Returns with huge Tax Benefits 4. Reinvestment of Gains . Hence ,No need to look for other investments 5. No need to track the Market Condition 6. Systematic process for investment and withdrawal (SIP/SWP/STP/Triggers)7. High Liquidity8. Large Tax benefits on investment as well as withdrawal which are unavailable with other kind of Investments

Remember Equity always outperform other kind of Investment and gives excellent returns over lomg run

Why You should Invest in Mutual Funds

Rebate U/S.80C for investment in Equity Linked Savings

Plan for investment upto Rs.150000/ -(Lock in only 3 years) No Tax on withdrawal after one year from Equity funds and

after 3 years from ELSS funds . All dividends received from Mutual Funds are exempted

from Tax . No wealth Tax.

So, keep Equity funds for more than I year and forget to pay any Tax just enjoy Tax free Dividends and Long Term Capital Gains .

Tax Benefits to Mutual Funds Investors

Mutual Funds invest in Capital Market –Equity shares and -Debt

instruments .

Capital market is volatile and it is difficult for us to understand and track due to globalization and high volume of information inflow.

The market operates during 9.00 a.m. to 3.30p.m. when we are busy with our profession and can not take investment decisions.

This Market risk is managed by Fund Managers

Risk in Mutual Funds

The Fund Manger of the Scheme is

Knowledgeable person who is qualified and understand Capital Market.

He keeps a watch on the Market Condition as well as individual Stock position.

He is skilled taking Buying and selling decisions. Advantage : You are not required to track

Market, just keep on investing in MF and when you need money just sell the required no. of units and continue your investments through SIP

Role of Fund Manager and Risk Management

In Mutual Funds Investment can be done either in Lump sum or

in small amount through SIPs.

Generally, first minimum Investment is Rs.5000/-for Lump sum and Rs.500/ -th. SIP (It may very from scheme to scheme).

Investment can also be done for Minor Child .

Note: Once invested with one Fund House a folio no. will be generated and further investment can be done under the same folio for different schemes without much of the formalities.

How You can Invest in Mutual Funds

Decide your future requirements (Goals) Choose the right fund for each requirement Start investing through SIPs in each fund When expenditure is to be made just redeem,

so your existing financial status will not be affected due to expenditure

Mutual Funds create a Tax efficient wealth.

How to benefit from Mutual Funds Investing

You need to go through KYC formalities with following

documents:1. One Photograph (Coloured Passport size)2. PAN Card (Copy and Original)3. Address proof (Copy and Original)4. Cancelled Cheque 5. Cheque for Initial Investment

Note : KYC formalities and initial investment can be done at the same time .

Requirements for Investment

How SIP Works

How SIP Works

Return in Mutual

Funds

Return in Mutual

Funds

Disclaimer:Mutual Funds investments are subjected

to market risk. Past performance in no way guarantees future performance. Please read the offer documents before investing .

Return in Mutual Funds

Though Mutual Funds can offer upbeat returns if

properly chosen but the selection of right scheme among large no. of MF schemes is an herculean task.

Think 55 MF AMC offering 30 schemes each so finding the

right scheme is not possible by common investor.

To help inventors to choose right funds AMFI has mandated that MF should be distributed by AMFI Certified person only.

What are the Risk in Mutual Fund Investment

MF Center

116/215,Shipra Path,Agarwal Farms ,Mansarovar, JAIPUR

RAJASTHANINDIA

Mobile: 9982149626/7792944066

Thank You !