What is the difference between the equity mutual fund & tax saving mutual fund? Which gives us maxium gain?

Question

I wish to invest into any mutual fund. Let me have the fact of beneficial mutual fund.

Answer 1

Equity mutual funds: it usually refers to funds that hold only stocks, any type of stock. These are taxable.

Tax saving mutual funds: which I think are the Tax exempt mutual funds, are funds that invest mostly in treasury bonds, though it might hold some stocks. They pay you back a certain amount of interest and are tax free.

Better returns? That really depends, equity funds usually has a faster return since its mainly invested in stocks, but its volatility it's higher than tax exempt funds. Tax exempt funds gives you a slower return because of the maturity term of the bonds; but it pays you back interests.

If you are new to investment, and you want to hit the stock market, I believe that mutual funds are the best choice.

Answer 2

Identification 1. Remember that an individual equity is just the stock of one company. When you only trade the stock of one company, you open yourself up for additional risk. All stocks are prone to market risk, the risk that the entire stock market goes down. You also have the risk that the individual business isn't competitive or managed properly when you buy an individual stock. Mutual funds contain many different stocks and contain the money of thousands of people. Because of this, they diversify. Diversification removes the risk of losing all your money if one stock is mismanaged. Time Frame 2. Purchase a mutual fund for a longer period. Many people that do equity trading buy and sell rapidly to make a profit. These short-term traders hope to make money with every transaction and don't need a huge gain to show a profit. Investing in mutual funds is a long-term investment. Even though some people trade equities on a buy and hold basis, most don't have the money to ride the rough times and end up selling when the stock drops because of poor management or scandal. Mutual funds rise and fall with the sector they represent, and the dips tend to be smaller than those of individual stocks in that sector. That's particularly true if one has a poor management team. Misconceptions 3. Trade some mutual funds on the open market. Most people think of open-end funds when they consider mutual funds. You purchase from the company, and the company continuously creates more shares as it receives money. Closed-end funds trade on the market like a stock, but you get a variety of companies. That's unlike the individual stock found in equity trading. There is often a penalty imposed by open-end funds for trading among the funds too frequently. Effects 4. Control your investment more by equity trading rather than trading mutual funds. A mutual fund manager continuously trades the stocks inside the fund. Even though you get a list of the stocks inside the fund, they may not be present when you actually purchase the fund. You have no control over the manner that the fund manager trades the stock. Features 5. Check the stock inside the fund. If you trade both individual equities and mutual funds, try not to overlap your stock purchase with the stocks inside the fund. This leads to too great of an exposure in one stock. The same holds true if you invest in several mutual funds. Check the largest holdings and make sure that they don't all contain the same stocks. Potential 6. Learn to use the tools of the equity trader. The differences between equity trading and mutual funds is the amount of knowledge you need when you trade. Mutual fund managers use tools to select the stocks for their funds. All you need to do is select the balance of your portfolio. If you trade individual equities, you need to learn to use fundamentals or technicals. Fundamentals are facts about the company, and technicals predict the future price of the stock based on the past price. They use charts and graphs. Mutual funds require less knowledge about the individual stocks and more about the trends of the markets.

Answer 3

Under section 80, Indians can invest upto Rs 1 lakh in ELSS (Equity Linked Saving Scheme, also commonly known as Tax Saver schemes) funds per year/per individual. The amount invested in a ELSS/Tax Saver scheme is Tax deductible on your tax return.

E.g.,

Say you are a male and earned Rs 2 lakh. You invest Rs 1 lakh in a ELSS fund, such as HDFC Tax Saver fund.

Your taxable income in this case would be: Rs 2 lakh - Rs 1 lakh = Rs 1 lakh.

For a taxable income of Rs 1 lakh, there is ZERO tax.

Had you "NOT" invested in the HDFC Tax Saver fund, then your taxes are

Your taxable income in this case would be: Rs 2 lakh

For a taxable income of Rs 1 lakh, there is a tax of Rs 15,000/-.

Therefore, in this scenario, you save Rs 15,000/- in taxes by investing in a ELSS scheme.

Now, what is the catch for investing in a ELSS scheme.

(a) Your invested money is LOCKED for a period of 3 years. i.e., Once invested in a Tax Saver fund, your money cannot be taken out for a period of 3 years. But this is a blessing in disguise, because Tax Saver funds generally yield healthy returns during a 3 year period.

(b) Except for the Pension plan funds which usually locks the money until the age of 58 or so, all ELSS schemes invest upto a 100% in equities/stocks. Therefore, inherently investing in a ELSS is risky.

Comparing equity mutual fund and a tax saving one, I would say Tax saving funds generally perform better because there is less pressure on the Tax Saving fund manager to SELL during down markets for redemption to unit holders.

Answer 4

in equity mutual fund you can invest anytime and redeem at anytime but investment is subject to income tax conditions apply.You cannot claim exemption over this investment and there is no lock in period.Bu it tax saving funds there is lock in period during which you cant come out of it,but investment in this scheme is eligible for claiming exemption.Apart from this both will yield best returns depends upon the fund management coy.Generally mutual fund is the best for those who doe snot want risks comparatively investment in stocks.For detailed analytics lo gin www.easymf.com.

Answer 5

they r almost similar. they r both diversified equity funds. in equity funds u do not get any income tax benefit for the amount of investment but in tax saving funds there is a lock in period of 3 years (u can not withdraw money before completion of 3 years) and u r eligible for deduction of ur invested amount upto Rs 1 lac, alongwith other eligible investmens e.g. life insurance premia, PF contribution etc.. max amount upto one lac for all these investments taken together is exempt from income tax. for dividends & capital gains the provisions r same for both type of funds. as i m an investment advisor, u can contact me for further info if u so wish ([e-mail])

Answer 6

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Good Luck and Best Wishes!