I am 32 years old. I want to invest ₹3 lakh in a mutual fund for a period of minimum three years. I came to know about balanced funds that give handsome returns and if I opt the dividend option, I will get tax free returns. Or should I go for New Fund Offers (NFOs) of capital protection funds. Please advise.
- Rahul Pandya
Are you new to mutual funds? If yes, you must read these before you start your investment journey. First things...
Invest in equity-oriented balanced schemes only if you have an investment horizon of at least five years. These schemes invest in a mix of equity (at least 65 per cent) and debt and they can be a little volatile in the short term. By the way, you don't have to opt for the dividend option to get tax-free returns from a balanced fund. If you hold on to the investment for more than a year, your investment would qualify for long-term capital gains tax which is zero. Also, the dividend option is not a great idea if you want to grow your money over a long period. Read: Time for the Dividend Misconception to Go Away.
We do not recommend investing in New Fund Offers (NFOs). We believe that it is always better to invest in a scheme with a performance record than an untested one.
This article was originally published on December 11, 2015.
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