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Money is not just a medium of transaction but also a means to attain financial security and achieve our financial goals. To generate returns or income from money earned, it is important to save and invest. The Indian investment landscape is peppered with various investment choices that can meet an individual investor’s risk and return requirements. From the relative safety of fixed return bearing instruments to the potentially higher returning equities, the Indian investor is spoilt for choice when it comes to building an optimal investment portfolio. An investment avenue that has emerged as a popular investment choice in the recent past is mutual funds (MF). According to data on the AMFI website (www.amfiindia.com), the MF industry witnessed ~44.2 million folios being added between March 2014 and June 2019. Investing in mutual funds can have its own host of benefits making them a compelling investment avenue. Some of these are discussed below:
Mutual fund investing can be simple and convenient. All you need to get started is a KYC (know your client) and a permanent account number (PAN). Anyone looking to invest in mutual funds can fill in an application form and submit it online or offline, either directly or through intermediaries. All you have to do is furnish the above mentioned credentials (KYC and PAN). Additionally, mutual funds also give you the flexibility of investing any amount (subject to a minimum amount which will vary from one asset management company (AMC) to another) that you wish. You can start small or big, as per your comfort and convenience.
Mutual fund schemes are professionally managed by qualified, and experienced fund managers who are supported by a qualified research team that helps them conduct in-depth research. They also have access to real-time market data that aids in investment decision making. This is an advantage because as a retail investor you might not have access to this kind of research or data, or you might find it difficult to track and execute upon investment opportunities.
Mutual fund schemes are professionally managed by qualified, and experienced fund managers who are supported by a qualified research team that helps them conduct in-depth research. They also have access to real-time market data that aids in investment decision making. This is an advantage because as a retail investor you might not have access to this kind of research or data, or you might find it difficult to track and execute upon investment opportunities.
Investors have the option of choosing from multiple mutual fund investment schemes that are focused on a variety of asset classes and strategies. Every scheme comes with a specific risk profile that indicates the scheme’s level of risk basis its investment mandate. With varying levels of risk, each scheme also carries a different return potential. Mutual funds offer varying schemes basis market capitalization, asset class, sector, theme and strategy. Thus, mutual fund investments can help you build a diversified portfolio.
There are certain mutual fund schemes that can also provide investors with tax benefits. For example, investment in an equity linked savings scheme (ELSS) provides tax benefit under section 80 C of the Income Tax Act, 1961. An investment of up to Rs. 150000^ in an ELSS Mutual Fund is eligible for tax deduction under said section 80C and comes with a 3-year compulsory lock-in period. This deduction is only available to resident Indians (RI) and Hindu undivided families (HUF)
The main purpose that our investment portfolio serves is to help us achieve our financial goals. For this, it is imperative that we build a well-diversified portfolio that successfully captures our return requirements while adhering to our risk constraints. In that regard, mutual funds can be an optimal investment choice to consider for new, as well as, seasoned investors. With the numerous benefits of mutual funds, it is no wonder that mutual fund investments are gaining traction with the average investor.
^As per the Finance Act, 2005, read with notifications dated 3rd November 2005 and 13th December, 2005 issued by ministry of finance, subscription to the extent of Rs.150,000 in ELSS funds by Individuals and HUFs should be eligible for deduction u/s 80C of the Income Tax Act, 1961. Investors are requested to consult their tax advisor in this regard. The investments in such ELSS funds shall be locked-in for a period of 3 years from the date of allotment.
It is mandatory for all mutual fund investors to undergo a one-time KYC (Know Your Customer) process. For more info on KYC specifically on: the procedure for completing KYC, for changing address details, for changing contact details.
For changing bank details, visit bnpparibasmf.in/investor-centre/information-on-kyc
For more info on submitting a complaint or a grievance, visit https://www.bnpparibasmf.in/contact-us
Further, investors should ensure that they transact ONLY with SEBI Registered Mutual Funds listed under Intermediaries/Market Infrastructure Institutions on the SEBI website https://www.sebi.gov.in/intermediaries.html
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Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
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