Here's what you must know about Mutual Fund if you don’t already
As inflation zooms every year, with our salaries unable to keep up with growing expenses, a ‘side income’ from investments seems to be a great way to maintain a comfortable lifestyle. However, laypersons often find stock markets difficult to navigate. They are volatile and hard to comprehend, and keeping track of one’s portfolio can be stressful.
Instead of taking huge risks in the stock market, many are taking the Mutual Funds route. In this form of investment, the highs are pretty high but the lows aren’t too steep. Therefore, Mutual Funds are a less-risky tool for a first-time investor to gain from the financial market.
Mutual Funds pool money from a large number of investors to invest in equities, stocks, bonds, and other securities based on the fund’s objectives. Managed by a professional fund manager, each investor owns a certain number of units of the fund. Gains are distributed proportionally post the calculation of a scheme’s Net Asset Value (NAV).
If you’re planning to invest in this instrument, here are some commonly overlooked features you must know about.
Diversification and liquidity
Mutual Funds offer the excellent benefit of diversification by investing in different asset classes, which minimises risk. Moreover, it’s easy to sell Mutual Funds in a small time period without a huge disparity in the sale price and the current market value.
Wealth tax exemption
Wealth tax is levied on the total value of your personal assets – real estate, financial securities, Bank Deposits, pension plans, etc. In India, wealth tax is levied at 1% of the net wealth in excess of Rs 30 lakh. It is levied on individuals, Hindu Undivided Families, and companies. It is not levied on Mutual Funds as specified under Section 10(23D) of the Income Tax Act.
Loan against Mutual Funds
When taking a loan, one must think of what to provide as security or collateral. Mutual Funds solve this problem for you – it is possible to take a loan against your fund units. As with all other banking processes, this too can be done digitally. HDFC Bank is one of the first banks to offer Digital Loan against Mutual Fund. The feature enables you to pledge assets for Mutual Funds online, and get an overdraft limit set in minutes!
The advantage of borrowing against Mutual Funds is that your units do not need to be redeemed prematurely, keeping your systematic investment plan (SIP) intact. Loans against hybrid Mutual Funds can be availed at any bank or non-banking financial company (NBFC), with your Mutual Fund units pledged as security.
HDFC Bank Loan Against Mutual Funds programme offers you instant funds, retention of Mutual Fund returns without liquidation, and much more. The clean interface, unparalleled customer support, and great Mutual Fund schemes instil confidence in both current and prospective customers. The new Instant Access Facility under Liquid Funds is another attraction, under this you can get your money faster than before. As far as investing in Mutual Funds is concerned, this is definitely the way to go!
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* Mutual Funds are subjected to market risks. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. You are recommended to obtain specific professional advice from before you take any/refrain from any action.