I have heard that mutual funds are better than FDs. How can I invest in mutual funds? What are the channels of investing in funds? I have completed third year of my engineering college and I work part time. I want to invest my income right from the start.
- Apurv Bargale
Your decision to forgo spending and save even while you are studying is commendable. You have at least two years until you start earning a regular income. Before starting any grandiose investment plans you should consider potential expenses that may halt your investment midway.
If you anticipate any such expenses, which at your age, could arise from anything as simple as coaching fee, a gadget purchase or a vehicle breakdown; you should put your money in an easy to access savings account.
You are right about mutual funds being better than fixed deposits. Funds give returns higher than FDs and are more tax-efficient. Returns from FDs are added to income and taxed according to the tax slab. Whereas gains from funds are taxed at lower rates determined by the tenure of investment and the type of fund.
If you are completely sure that you will not need your money and want to get a taste of investing you can start with a Systematic Investment Plan (SIP) in mutual funds. You can do this only if you have a PAN card, since almost all investment avenues mandate you to have one. An SIP allows you to invest a fixed amount at a fixed period of time decided by you. SIPs inculcate regular saving discipline and protect you from any market peaks.
You can invest in mutual funds through mutual fund distributors, agents, brokers, websites and directly through the fund house. You can locate fund distributors through the Amfi website or contact the concerned fund house through branch offices or online.
You can invest in any well rated diversified equity-oriented large and mid-cap or hybrid fund from the fund select feature on our website. Equity funds invest in stocks of various listed companies and hybrid funds invest 60-80 per cent of their assets in debt and the rest in equity. The rise in these funds may not be as high as equity but they are well cushioned during market downsides.
This article was originally published on April 02, 2013.
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