Which SIP is best

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WHICH MUTUAL FUND IS BEST FOR SIP?

Firstly, we try to understand, what SIP is?

SIP is Systematic Investment Plan in which we need not to invest amount on lump sum basis. In this plan we invest fixed amount at regular intervals. This plan is beneficial in long run by investing small fixed amount over a period of time and also beneficial for those who do not have high income. Even a student can start from Rs. 100 per month investment in mutual fund.

People generally having questions related to investment in mutual fund SIP

  • Which mutual fund is best?
  • Should we invest in debt oriented mutual fund or equity oriented mutual fund?
  • Which mutual fund is risky or having less risk?
  • Which mutual fund will give recurring benefit over a period of time?

However there is no particular answer of these questions because this depends on the nature of the investor that what he is expecting? , what is his risk appetite?

Let us try to understand Debt Oriented Mutual Fund vs. Equity Oriented Mutual fund

Equity Oriented Mutual Fund

  • An equity fund is the fund which means investment in owners fund in the stocks of companies.
  • Equity fund can provide higher risk to the investor but also having higher return as we know that any investment having higher the risk, higher will be the return.
  • If investment in equity mutual fund is matured after 12 months then long term capital gain shall be exempt from income tax and if matured before 12 months then short term capital gain shall be taxable @15%.
  • Investor can claim deductions u/s 80C.
  • Equity oriented mutual fund is best for the person who is having higher risk appetite.

Debt Oriented Mutual Fund

  • Debt fund means investment in government bonds, corporate bonds, non-convertible debentures and other debt oriented instruments.
  • Debt fund is less risk bearing mutual fund and also earns fixed return in the form of interest.
  • If debt oriented mutual fund is matured before 36 months then short term capital gain shall be taxable on normal slab rate and if matured after 36 months then long term capital gain shall be taxable @20% with indexation.
  • An investor cannot claim deduction u/s 80C.
  • Debt oriented mutual fund is best for the person who is risk adverse in nature.

CONCLUSION

Investment in equity oriented mutual fund or debt oriented mutual fund depends on the investor’s perception related to risk and return. If you are risk adverse but wants fixed return in the form of interest then you should go for making investment in debt mutual otherwise equity oriented mutual fund is best.

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