By Mukesh Mehrotra,IFA
Financial Consultant and Faculty and Trainer –
Banking Financial Services and Insurance and Soft
Saving through Mutual
Generally Savings is taken as the residual money left after spending every
As per principal of Financial Planning Savings is the money you need to
spare every month for your future needs like Education of Child, Marriage
and other necessary or contingent expenses, for buying Home ,Car etc. so
that these expenses may not affect your financial health in future or we
can say savings is a provision for future expenses
So the amount left after savings may be comfortably spent without any
worry about future expenses.
It is said that your Salary provides you just Bread-n Butter but it is the
prudent investment of the small amount you save which creates wealth
What is Savings
Generally savings is put in Banks FD,RD,in Government Schemes like
NSC, PPF, Bonds etc.
LIC is also some time sold a savings product but practically it is Risk
Property require large capital with inherent risk.
Gold is another product but after development of Capital Market ,it is
no more an investment product rather it is now a consumption
Equity market require lot of knowledge and timely action for sale –
Purchase, which is not possible for Active Earners.
How the Savings is
The money you saved after sacrificing your expenses or
desire should be put in some Financial Product which
give you sufficient money at the time when future
expenses are to be done.
So definitely it should give you a return which should be
more than the inflation or Cost escalation so that the
money saved may not fall short of the requirement at the
time when expenditure is to be done.
If we leave the govt. declared inflation figure aside we
find that every time we go to the market we need to pay
high rates as compared to previous purchases.
What is investment
It is a rule High Risk –High Return and Low risk Low
So, investment is done looking to the individuals risk
All the traditional products like FD /RD/Bonds/PPF fall
in the category Low Risk-Low Return.
Return means net cash in hand not the rate mentioned on
instrument. The effective return on the traditional
instrument is always subjected to Income Tax and thus
our return happens to be lower depending on our Tax
slab rate i.e.10/20/30%
The return on these instruments is dependent on RBI
What is Return
Liquidity refers to the ease and speed with which I
can convert my asset into cash.
So ,in case you need funds and your investment does
not give you money in time of need How you will
All the traditional products are not liquid except
Bank FD where you can get money by paying some
charges (which will again reduce your return)
Presently the Situation is very pathetic .
Traditional Investments are not giving returns sufficient
to meet the increasing cost and instead of increasing your
Capital may practically reduce.
To invest in High Risk –High Return assets
is not possible for a common man as either he
do not have large amount of money or do not
have risk bearing capacity or do not have
Knowledge/Expertise/Time to invest and
manage Equity Shares.
So where a normal man with Small investible
Surplus with reasonable risk appetite invest.
A Billion Dollar Question
Solution to all these issues
Mutual Funds are available for every kind of investor
Big or Small
High Risk Investor as well as Low risk investors
Mutual Funds collects money from investor which
may be as low as Rs.500/-per month.
The money so collected is invested in Capital market
in Equity Shares and Debts (Bonds) by Fund
Manager, who has the knowledge of Working of
Markets and takes decision to buy and sell securities.
The income generated is distributed to the investors
in the form of Dividend,Appreciation in NAV
What is Mutual Fund
Mutual Funds are operated by Asset Management
Companies formed as per provisions of Company Law.
Presently there are almost 55 MF AMC ,some of which are
ICICI, HDFC, IDFC, Reliance , Axis, Kotak, Frankline
Templton, DSP Blackrock, IDFC .
These AMC can not work at their own wishes but needs
to follow rules and regulations prescribed by SEBI(
Security Exchange Board of India )which is a regulator of
They have to follow Code of conduct prescribed by AMFI
Mutual Funds are regulated by SEBI and RBI
Mutual Fund – Well
14. 1. Converts Savings into Assets and Beats Inflation
2. Convenience of Investing Small amounts via SIP route
3. Potential for Higher Returns with huge Tax Benefits
4. Reinvestment of Gains . Hence ,No need to look for other investments
5. No need to track the Market Condition
6. Systematic process for investment and withdrawal
7. High Liquidity
8. Large Tax benefits on investment as well as withdrawal which are unavailable with
other kind of Investments
Remember Equity always outperform other kind of Investment and
gives excellent returns over lomg run
Why You should Invest in
Rebate U/S.80C for investment in Equity Linked Savings
Plan for investment upto Rs.150000/ -(Lock in only 3
No Tax on withdrawal after one year from Equity funds
and after 3 years from ELSS funds .
All dividends received from Mutual Funds are exempted
from Tax .
No wealth Tax.
So, keep Equity funds for more than I year and forget to
pay any Tax just enjoy Tax free Dividends and Long Term
Capital Gains .
Tax Benefits to Mutual
Mutual Funds invest in Capital Market –Equity shares and -Debt
Capital market is volatile and it is difficult for us to
understand and track due to globalization and high
volume of information inflow.
The market operates during 9.00 a.m. to 3.30p.m. when
we are busy with our profession and can not take
This Market risk is managed by Fund Managers
Risk in Mutual Funds
The Fund Manger of the Scheme is
Knowledgeable person who is qualified and
understand Capital Market.
He keeps a watch on the Market Condition as
well as individual Stock position.
He is skilled taking Buying and selling decisions.
Advantage : You are not required to track
Market, just keep on investing in MF and when
you need money just sell the required no. of
units and continue your investments through
Role of Fund Manager and
In Mutual Funds Investment can be done either in Lump sum
or in small amount through SIPs.
Generally, first minimum Investment is Rs.5000/-for Lump
sum and Rs.500/ -th. SIP (It may very from scheme to scheme).
Investment can also be done for Minor Child .
Note: Once invested with one Fund House a folio no. will be
generated and further investment can be done under the same
folio for different schemes without much of the formalities.
How You can Invest in
Decide your future requirements (Goals)
Choose the right fund for each requirement
Start investing through SIPs in each fund
When expenditure is to be made just redeem, so your
existing financial status will not be affected due to
Mutual Funds create a Tax efficient wealth.
How to benefit from
Mutual Funds Investing
You need to go through KYC formalities with
1. One Photograph (Coloured Passport size)
2. PAN Card (Copy and Original)
3. Address proof (Copy and Original)
4. Cancelled Cheque
5. Cheque for Initial Investment
Note : KYC formalities and initial investment
can be done at the same time .
Disclaimer:Mutual Funds investments are subjected to
market risk. Past performance in no way guarantees future
performance. Please read the offer documents before investing .
Return in Mutual Funds
Though Mutual Funds can offer upbeat returns if
properly chosen but the selection of right scheme
among large no. of MF schemes is an herculean
Think 55 MF AMC offering 30 schemes each so finding
the right scheme is not possible by common investor.
To help inventors to choose right funds AMFI
has mandated that MF should be distributed by
AMFI Certified person only.
What are the Risk in
Mutual Fund Investment