If you are into finances, you will know how the mutual funds have been recent. Well, even if you are not a financial geek, goofing around with the concept of mutual funds with tax benefits can never harm. Do you know the best part about it? It offers you multiple perspectives to look through and judge.
So, let's dive in and explore the different benefits of mutual funds below.
Benefits
Lesser Risks for the Investor
Usually, when one investment spikes up in the equity market, another goes downward, affecting the all-over performance of the portfolio. The mutual funds, however, offer ample scope for diversification for the investors. Mutual funds possess a diverse range of securities. Thus, the interests of the investor are safeguarded in the case of the downfall of the market.
Allows Flexible Investments
Do you know why mutual funds are popular? Well, it's the flexible investments it stands for. You can start as low as with Rs. 500 and go up to whichever amount you prefer. Once you have considered the risk factors, estimated returns, and lock-in period, you're good to go!
Low Lock-in Periods
Compared to the other investment options, Mutual Funds offer the shortest lock-in periods. Your money remains locked up to the fund for a minimum span of three years. While investments like PPF, FD, and ULIPs come with a condition of a five-year lock-in period, the mutual funds do not tie you down. Moreover, you also get the option to stay invested or withdraw once the lock-in period is over.
Great for Saving the Taxes
Mutual Funds come as one of the best tax saving investment options that can fetch you several tax relaxations. As per Section 80C of the Income Tax Act, the exemption can go as high as Rs. 1.5 lakhs per year. Indeed, there are other tax-saving options like PPFs and FDs (tax-saving), but none can reap you higher returns like the Mutual Funds.
Ensures Safe Investment
Recently, with the SEBI guidelines, investments in the mutual funds have been labeled legally safe. So, from now onwards, you get to see a color-coded version where you can tally the risk factors and estimated returns of a particular investment. While the blue color identifies low-risk investments, yellow and brown colors indicate medium and high-risk factors.
Offers Flexible Fund Liquidity
Unlike Fixed Deposits, Mutual Funds do not tie you down the hook till the tenure ends to withdraw your money. The scopes of liquidity are quite flexible in Mutual Funds, and that's what makes it count as one of the best benefits of investing in it.
Conclusion
Let us tell you something about taxes - nobody likes to pay them. So, one cannot certainly avoid any path that leads to the rescue. Mutual funds come as one of the most helpful tax saving investment options, so giving it a shot will only be beneficial!