By: Ryan Crown
By nature Mutual Funds are not tax saving instruments but some mutual fund investment products also offers tax saving plans. Generally income that is earned from Mutual funds is categorized under two heads dividend and capital gains. Given that the tax implications can have a significant impact on the return earned it is necessary to understand the tax for both these heads of income. Income earned through dividends is tax free in the hands of the investor. The tax on most occasions is actually paid by the Mutual Fund Company itself. Investors who fall in the highest tax bracket should opt for the dividend option in mutual fund schemes. Capital gains from mutual funds are of two types - short term (1-3year) and long term (more than 5 years). This classification is based upon the period of holding. If the investment is sold within a year 15 days from the date of purchase, any capital gain made would be treated as a short term nature. Hence the tax deducted will be normal. If the mutual fund investment is sold after a year from the date of purchase, any capital gain made during that period will be treated as a long-term capital gain. Here the tax that would be deducted will depend on how long the investment is kept after a year prior to getting it sold. The longer the fund is kept the lesser the tax to be paid.
A Good Fund that could be used to invest upon is the equity linked saving schemes fund (ELSS). They are strong favorites for investing as they provide tax concessions on investments and are also exempt from long term capital gains tax. Apart from ELSS schemes, diversified equity schemes are a good investment considering that capital gains in equity funds below one year are taxed at a rate of 10% and over a year are tax-free. This option can be best exercised using Growth Funds. The primary objective of Growth Funds is to provide investors long-term growth of the capital invested. Dividend paid in Dividend Plans is tax free, and no distribution tax is deducted. However, every time we buy or sell equity shares a Securities Transaction Tax, STT, of 0.25% is paid and further when you redeem your investment, again STT is deducted from your redemption price.
Tax Planning & saving options requires a through study of the market conditions, especially if you are trying to do it in a period of slump. Proper Asset Allocation, research and the advice of the Fund Manager will definitely help. Long term capital loss can be set off only against long term capital gains. Short term capital can be set off against any capital gains, whether short term or long term.
Sunday, January 18, 2009
Mutual Funds As A Long Term Investment
By: Roberto Bell
Mutual Funds are a long term investment. Period. Nothing short-term about them, no day trading. They are meant for the serious investor that is willing to take the time needed to grow their wealth over a long period of time. Why are mutual funds like that?
Well, a mutual fund is a collection of stocks, bonds or money market securities, which have been bundled together in one offering based on not only the goal, but the past performance of the individual components. They are taken as a whole, and as such, when some of the holdings in a fund rise, others may be falling, so the growth potential is not as extreme as, say, just one stock or bond. Over time though, mutual funds, can grow up to 8-9% a year, while the stock markets can gain anywhere from 10-11%.
Mutual Funds are a long term investment. Period. Nothing short-term about them, no day trading. They are meant for the serious investor that is willing to take the time needed to grow their wealth over a long period of time. Why are mutual funds like that?There are a variety of mutual funds that an investor can hold. Some examples are Bond Mutual Funds, which are mutual funds that are comprised of bonds that are offered by a company, State or Federal Government, or Mortgage and Asset-backed bonds.
Another type of mutual fund is the Stock Mutual Fund, or Equity Fund, as some have coined it. These funds are comprised of holdings in various stock companies, and as such, can be a bit riskier due to the volatility of the stock market.
You can even invest in a Precious Metals Funds that invest in Gold, Silver, Platinum, Palladium, and even Rhodium. When an investor contributes to a Precious Metal Funds, they will receive a certificate that represents the holding.
There are some terms associated with Mutual Funds that the investor should be aware of. The first is the Net Asset Value, or NAV, for short. The NAV is a calculation that takes the Funds total assets and minuses the total liabilities. This calculation is done daily, at the end of trading, to reflect the true value of the Fund.
Another term is liquidity, which is used to describe the amount of time it takes to convert the investment to its cash equivalent with the minimal amount of fees or price discount. Mutual Funds are not known for being liquid, that’s why we started out saying that they are a long term investment.
One of the most important factors in dealing with Mutual Funds is the Prospectus. The prospectus is a legal document that contains information about the Mutual Fund, such as what holdings are invested in, what the goal of the fund is, what the past performance of the fund, listing of fees, the manager of the fund, the risks of the fund, and the strategy to achieve the optimal investing balance. Anytime you have a question about a Mutual Fund, you can always refer to the Prospectus, and you can always have one mailed to you, or made available to you through download, when searching for a Mutual Fund to invest in.
Mutual Funds are a long term investment. Period. Nothing short-term about them, no day trading. They are meant for the serious investor that is willing to take the time needed to grow their wealth over a long period of time. Why are mutual funds like that?
Well, a mutual fund is a collection of stocks, bonds or money market securities, which have been bundled together in one offering based on not only the goal, but the past performance of the individual components. They are taken as a whole, and as such, when some of the holdings in a fund rise, others may be falling, so the growth potential is not as extreme as, say, just one stock or bond. Over time though, mutual funds, can grow up to 8-9% a year, while the stock markets can gain anywhere from 10-11%.
Mutual Funds are a long term investment. Period. Nothing short-term about them, no day trading. They are meant for the serious investor that is willing to take the time needed to grow their wealth over a long period of time. Why are mutual funds like that?There are a variety of mutual funds that an investor can hold. Some examples are Bond Mutual Funds, which are mutual funds that are comprised of bonds that are offered by a company, State or Federal Government, or Mortgage and Asset-backed bonds.
Another type of mutual fund is the Stock Mutual Fund, or Equity Fund, as some have coined it. These funds are comprised of holdings in various stock companies, and as such, can be a bit riskier due to the volatility of the stock market.
You can even invest in a Precious Metals Funds that invest in Gold, Silver, Platinum, Palladium, and even Rhodium. When an investor contributes to a Precious Metal Funds, they will receive a certificate that represents the holding.
There are some terms associated with Mutual Funds that the investor should be aware of. The first is the Net Asset Value, or NAV, for short. The NAV is a calculation that takes the Funds total assets and minuses the total liabilities. This calculation is done daily, at the end of trading, to reflect the true value of the Fund.
Another term is liquidity, which is used to describe the amount of time it takes to convert the investment to its cash equivalent with the minimal amount of fees or price discount. Mutual Funds are not known for being liquid, that’s why we started out saying that they are a long term investment.
One of the most important factors in dealing with Mutual Funds is the Prospectus. The prospectus is a legal document that contains information about the Mutual Fund, such as what holdings are invested in, what the goal of the fund is, what the past performance of the fund, listing of fees, the manager of the fund, the risks of the fund, and the strategy to achieve the optimal investing balance. Anytime you have a question about a Mutual Fund, you can always refer to the Prospectus, and you can always have one mailed to you, or made available to you through download, when searching for a Mutual Fund to invest in.
Saturday, January 17, 2009
Are You Ready To Invest?
By: Smithveg
We grew up in world in which the news about the failure of Social Security is almost as constant as the news about the failure HMOs. We all know that it is unlikely that many people who are currently contributing to social security will ever see the money we've invested into the program.
At least these funds are probably not coming back to darken our doors. This seems we need to find alternatives and end our reliance on the government for a comfortable retirement that doesn't appear to be in the woodwork.For this reason we are seeing more and more people in the twenty and thirty something generation taking matters into their own hands and investing not only for their retirements and the days when we can no longer work but also for those days when things happen and we need to fix broken houses, buy new cars, or pay hefty insurance deductibles for medical care.
There are many reasons we choose to invest and very few that would ever be considered the wrong reason. The question remains, because there are so many out there who are not yet investing, with so many reasons to invest, are you ready to invest?Here are a few situations in which if you don't think you are ready to invest you may need to revisit your opinions and decide that ready or not, you need to invest!!!If you have children and a job that doesn't offer a pension plan or matching retirement fund then it is probably a good idea to invest on your own.
Even if you don't have a corporate provisions for contributions you have alternatives such as Roth IRAs that will give you a tax break for investing some of your money and helping to plan for your own retirement.If you have children that will some day need dental work, medical services, and/or college educations it is about time that you began those saving plans. yet again there are tax deferred and tax fee options that are available and having this money invested ahead of time can save you so much money later on that it is worth making a few sacrifices along the way to secure the future of your children.If you want to give your daughter the wedding of her dreams then you absolutely need to begin preparing, saving, planning, and investing about 10 years before she's born.
Weddings are expensive and if you are going to go the dream wedding route you need to be saving some serious money in order to give her that fairly tale.Finally, if you want your retirement to be a nice comfortable existence and not to be spent in your future daughter-in-law's broom closet you need to be ready today to begin investing in your future retirement. Time is short, life expectancies are longer than ever, and the costs of living are continuing to rise at alarming rates. If you're not ready to invest you need to figure out why and fix the problem so that you can ready to invest and soon.
Investing in your financial future is the greatest gift you can give yourself by far. If you aren't sure where to begin or how, perhaps it's time to seek the services of a qualified financial advisor. His/Her advice may prove invaluable and may give you a much more comfortable future than you would have ever imagined left to your own devices.
We grew up in world in which the news about the failure of Social Security is almost as constant as the news about the failure HMOs. We all know that it is unlikely that many people who are currently contributing to social security will ever see the money we've invested into the program.
At least these funds are probably not coming back to darken our doors. This seems we need to find alternatives and end our reliance on the government for a comfortable retirement that doesn't appear to be in the woodwork.For this reason we are seeing more and more people in the twenty and thirty something generation taking matters into their own hands and investing not only for their retirements and the days when we can no longer work but also for those days when things happen and we need to fix broken houses, buy new cars, or pay hefty insurance deductibles for medical care.
There are many reasons we choose to invest and very few that would ever be considered the wrong reason. The question remains, because there are so many out there who are not yet investing, with so many reasons to invest, are you ready to invest?Here are a few situations in which if you don't think you are ready to invest you may need to revisit your opinions and decide that ready or not, you need to invest!!!If you have children and a job that doesn't offer a pension plan or matching retirement fund then it is probably a good idea to invest on your own.
Even if you don't have a corporate provisions for contributions you have alternatives such as Roth IRAs that will give you a tax break for investing some of your money and helping to plan for your own retirement.If you have children that will some day need dental work, medical services, and/or college educations it is about time that you began those saving plans. yet again there are tax deferred and tax fee options that are available and having this money invested ahead of time can save you so much money later on that it is worth making a few sacrifices along the way to secure the future of your children.If you want to give your daughter the wedding of her dreams then you absolutely need to begin preparing, saving, planning, and investing about 10 years before she's born.
Weddings are expensive and if you are going to go the dream wedding route you need to be saving some serious money in order to give her that fairly tale.Finally, if you want your retirement to be a nice comfortable existence and not to be spent in your future daughter-in-law's broom closet you need to be ready today to begin investing in your future retirement. Time is short, life expectancies are longer than ever, and the costs of living are continuing to rise at alarming rates. If you're not ready to invest you need to figure out why and fix the problem so that you can ready to invest and soon.
Investing in your financial future is the greatest gift you can give yourself by far. If you aren't sure where to begin or how, perhaps it's time to seek the services of a qualified financial advisor. His/Her advice may prove invaluable and may give you a much more comfortable future than you would have ever imagined left to your own devices.
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