Want to invest in Mutual Funds

Sumita Sinha 1
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Hi Pankaj,

I want to invest my monthly income in mutual fund scheme. I have a following basic needs:

1) Periodically I can invest Rs.1000 to Rs.5000/- on monthly basis. 2) Duration should be short term (min 1 to 3 yrs) 3) It may or may not be Tax saving 4) My investment must be in minimum risks i.e No Profit No Loss at the end of maturity. 5) Profit should be greater than 9% (upto 9% or below 9% I can get it through Bank RD scheme)

So, request you to please advise me the best Mutual Fund plan where I can invest my money on monthly basis with minimum risks.

Thanks in advance.

short-term-investment mutual-funds debt-mutual-fund fixed-maturity-plan
1 Answers

As your investment duration is short and you want minimum risk, I would advise you to only invest into debt based mutual funds and fixed maturity plans.

Fixed maturity plans (FMP) mutual funds are like fixed deposits (amount is invested for fixed term) and you cannot withdraw amount in between. These are close ended funds. You can enter only during NFO (New fund offer) period. At the end of term, amount would come back to your account automatically. Term starts from as short as 91 days and can go upto 5 years or more. You can choose to invest into FMPs launched by a reputed AMC (Asset management company) like HDFC or ICICI.

Debt long term plans are open ended (you can choose to invest and exit any time). Some of the best funds are: ICICI Pru Long-term plan, Birla Sunlife dynamic bond, IDFC Dynamic bond, SBI dynamic bond and SBI Magnum Income fund.

Profits are not guaranteed but they would be better than bank recurring deposits (RD) or Bank fixed deposits (FD) after tax. Returns from RD and FD are added to taxable income and taxed as per tax slab rates (if you are in 30% slab, effective return on these would become less than 6.5 percent). Whereas returns from FMP and debt mutual funds are considered as long term gain if investment is done for more than a year and income tax applicable is 10% without indexation and 20% with indexation.

Generally with indexation in effect, there is hardly any tax payable on these gains as CII (Cost inflation index, which is used in indexation) is growing rapidly, thanks to inflation.

Pankaj Batra5212
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