Things to Remember Before Investing

Quick Links: Website | Play Store | App Store | Instagram | LinkedIn

Before investing in mutual funds, it’s essential to consider the following factors:

• Investor Profile: Understand your investment profile, including age, financial goals, income, and risk tolerance. This information is crucial for selecting the right mutual funds. If you are working with a financial advisor, they will take these factors into account to recommend suitable investment options.

• Performance: While past performance is not indicative of future results, it’s vital to review a fund’s historical performance. Analyze how the fund has performed under various market conditions and compare it to its benchmark and peer funds to gauge its relative performance.

• Risk: Investing in mutual funds entails risk, although they generally exhibit lower volatility than direct stock investments. Since mutual funds invest in equity and debt instruments, it’s important to understand the associated risks, including market volatility for equities and credit and interest rate risks for debt securities.

• Lock-in Period: Most open-ended funds do not have a lock-in period, except for Equity Linked Savings Schemes (ELSS), which have a three-year lock-in period. Closed-end mutual funds may have a fixed lock-in duration. If liquidity is a priority for you, consider the lock-in terms of the funds you are interested in.

• Expenses: Every mutual fund charges fees known as the expense ratio, which covers the costs of managing the fund. Some funds may also have exit loads. High expenses can erode your overall returns, so it’s essential to evaluate these costs carefully before investing.

• Portfolio Manager and AMC: The experience and expertise of the portfolio manager (fund manager) play a significant role in a fund’s performance. It’s also wise to research the reputation of the Asset Management Company (AMC) to ensure they have a track record of effective management.

• Taxation: Mutual funds are subject to different tax treatments based on the type of fund and holding period:

  • Equity Mutual Funds: Short-term capital gains (STCG) tax applies to gains on holdings of less than one year, taxed at 20%. Long-term capital gains (LTCG) on holdings over one year are taxed at 12% for gains exceeding ₹1.25 lakh in a financial year.

  • Debt Mutual Funds: The gains arising from Debt mutual funds will be taxed at the investor's tax slab rate.

  • ELSS Funds: Investments up to ₹1.5 lakh qualify for tax deductions under Section 80C of the Income Tax Act (Old Regime), subject to the three-year lock-in requirement.

  • Dividends: Taxable in the hands of the investor at their applicable income tax slab rate. Dividends over ₹5,000 are subject to a TDS of 10% (effective from FY 2020-2021).

• Professional Advice: Seeking guidance from a financial advisor is highly recommended, especially for new investors. Although there may be a cost associated with hiring an advisor, their expertise can help you navigate investment choices and manage your portfolio effectively. When it comes to mutual fund investing, look no further - Miles Wealth is the best choice for mutual fund investing.

  
  

  Quick Links: Website | Play Store | App Store | Instagram | LinkedIn

  
  

  Give it a shot (it’s free) and let us know what you think! Your feedback is super helpful and helps us improve.