I am very much new to the stock market. I am planning to invest in mutual funds. Since I don't have any first-hand knowledge, I want to take some time and start from April. I have ₹80,000 in cash and want to start a Systematic Investment Plan (SIP). I want to know how should I invest that amount and in which funds I should start the SIP? Please help me with the name of funds and the correct way to invest.
- Mukherjee
First things... is a great place for your to start your investment journey.
You can keep the money in a savings bank account and start a Systematic Investment Plan (SIP) in a top-rated balanced mutual fund scheme. We typically suggest balanced schemes to new equity investors. These schemes invest in a mix of equity (minimum 65 per cent) and debt and they are less volatile than pure equity schemes. The debt part of the portfolio provides a cushion during a volatile phase in the equity market.
You can also park the money in a liquid fund and opt for a Systematic Transfer Plan (STP) to invest in a balanced scheme. If you are in the highest tax bracket, you can opt for a dividend reinvestment option while parking the money in the liquid scheme. The dividends are reinvested under this option and this results in almost zero capital gains. If investments in debt mutual funds are sold before three years, the short-term capital gains are added to the income and taxed as per the Income Tax slab applicable to the investor. However, note that this method doesn't result in huge savings as mutual funds pay a Dividend Distribution Tax (DDT) of 28.84 per cent on dividends declared in a liquid scheme.
Here is a list of top-rated liquid schemes.
Here is a list of top-rated balanced schemes.
This article was originally published on January 05, 2016.
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