Mutual Fund tips and basics

As we all know , now that market has corrected and Sensex has tipped, this is the right time tio invest in various Mutual Funds. The fundamental is simple, now the NET ASSET VALUE that is the per unit price of Mutual funds is all time low . So you can purchase more units right now. However,lot of people are in dilemma whether to invest in Growth option or Dividend option. Moreover which sub option of Dividend . Let me try and solve that dilemma for ever. Lets use an example to help us explain the same. Today Say XYC AMC launches A product names “ABC FUND”.

I was always confused- as in Whats meant by Fund of Funds. Hope you find this as handy as I did

 

Mutual funds are familiar to many people, but unless you work in finance, hedge fund are probably more of a mystery. If you've ever wondered about hedge funds or whether they might work for you, read on to learn more about this enigmatic investment.

Fixed Maturity Plan is commonly known as the FMP.It is a great instrument to park ones funds in the present market scenario The post tax return in case of FMP is much much higher than the case of Fixed Deposits. In case of Mutual fund the appreciation is taxed as per LONg Term Capital Gain and Short Term Capital Gain .While in the case of a Fixed Deposit you are taxed on the basis of the Taxation bracket.Hence if you want to park your money for a short period of time FMP is the best product .

I am under the impression that both Unit Linked insurance Plan as well as Equity Linked saving Scheme qualify under Section 80 C of Income Tax Act. For those , who are as ignorant as I am, They are exempted from tax upto a ceiling of Rs 1,00,000 ( or is it 1,20,000). What ever the case might be, Which is a better option for investing- That would solve the dual purpose of tax exemption as well will lead to capital appreciation . What are the Pros and cons involving both of them? Which is more suitable in the short term?

There are mainly 4 types of mutual funds.

1. Equity based Mutual funds(also known as growth mutual funds)- These funds are mainly stock market oriented and all the pooled fund is invested in various stocks.

2. Debt mutual funds- The moeny in this type of funds are invested primarily in secured financial instruments and has a lower return on investment.

3. Money market funds- These funds invest in short term money market instruments and yeild short term returns. 

Mutual Funds have been in vogue for quite some time in US and other western countries, but in India, mutual funds hasent yet reached the grassroot level. The buyers of mutual funds are mostly restricted to the younger generation of people and people who know about equity and stocks.

Although, the above statement may not be entirely true, but the reach of MF (abbreviation for Mutual Funds) has been comparatively small.

Worst of all, people from rural areas are hardly aware of something like mutual funds.