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Mutual Funds Thread

Discussion in 'Hangout' started by ghodlur, Jan 9, 2014.

  1. Ravi

    Ravi Staff Member Janitor

    Messages:
    6,001
    Bangalore
    Grande Punto 1.3
    If you extend to one year, there will be no tax, as it will be treated as long term benefits.
    For 9 months, invest only in debt fund. Put in Equity, only if you are ok to absorb the risk.
    Post poll scenario is already factored in for short term :). Invest in equity if duration is more than 2 years or so.
    2 people like this.
  2. krish1484

    krish1484 Novizio

    Messages:
    43
    Chennai
    Chennai
    Linea T-Jet
    I would suggest you to compare Liquid Funds with FMP s as well. WRT taxation, a 9 month Liquid Fund's taxation will be at your current tax slab rate in growth option and flat 25%(excluding surcharge) in dividend option. The latter is Dividend Distribution Tax.
    Equity MF s: SIP s are beneficial during fluctuating markets but I don;t see that happening and it is likely that markets only rise , so don't you think that your cost of acquisition will keep on rising month on month!?
    1 person likes this.
  3. ghodlur

    ghodlur Esperto

    Messages:
    2,326
    Thane
    But I thought that Liquid funds are debt fund which invest in money markets. So how is this type of fund different from pure debt funds? If the taxation is going to be at current tax slab rate I might well off putting the fund in bank FD. I already have enough exposure to equity and wanted to invest in debt. hence the query.
  4. krish1484

    krish1484 Novizio

    Messages:
    43
    Chennai
    Chennai
    Linea T-Jet
    Interest on bank FD s ideally needs to be shown while filing returns in Other Income, right? This again gets taxed at current slab rate you are in.
    If bank fd s , then put it in the name of your dependents who are in a lesser tax slab.

    Sent from my GT-I9300 using Tapatalk
  5. Ravi

    Ravi Staff Member Janitor

    Messages:
    6,001
    Bangalore
    Grande Punto 1.3
    Yes Liquid funds invest in Money Market. This is also under debt fund category, but for shorter duration.

    Consider this thumb rule -
    Bank Saving Account => Liquid Fund
    Fixed Deposite => Debt Fund (longer duration).
    1 person likes this.
  6. kamikaze

    kamikaze Timido

    Messages:
    14
    Bangalore
    By this, I am sure that Ravi means that a Liquid Fund is similar to a savings account, while a debt fund is similar to FD. Just clarifying this, since the first time I saw this, I read it as Savings account is equal to or greater than liquid fund and likewise for FD over debt - which is not usually the case.

    The high interest rate regime has created a unique scenario right now in the market with short term debt funds providing higher returns than longer term debt or FDs. Also, since short term debt funds usually have near zero exit loads, they provide an ideal instrument to park money in the short term with a low level of risk (almost no risk since these funds invest in government backed bonds) with a moderate level of return in the short term (better than a bank FD for the same period).

    How long this scenario (short term debt > FDs) will last is anybody's guess - probably till the RBI thinks of reducing interest rates (the market will probably factor this into pricing before the RBI actually reduces rates)

    For people considering investments into mutual funds of any form (Equity, Debt or Hybrid), I suggest leveraging the wealth of data and research available free on valueresearchonline.com. It is very informative and very importantly - unbiased.

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