Hybrid mutual funds allow you to invest in a combination of debt and equity. These are also called balanced funds.
Equity Hybrid: In an equity hybrid fund, at least 65% of the corpus is invested in equities and the rest in debt. To be called an equity fund, at least 65% of the fund needs to be invested in equity. The remaining corpus is invested in debt up to a maximum of 35%.
Debt Hybrid: In a debt hybrid fund, at least 75% of the corpus is invested in debt and the rest in equities.
Hybrid funds have an exposure to debt. This protects your investment when stock markets are volatile or crash.
When stock markets rise, or there is a bull run, the hybrid funds give better returns than debt funds.
With an exposure to both equity and debt the hybrid fund is naturally diversified. You don't have the headache of balancing the portfolio.
Equity hybrid funds are treated as equity, for tax purposes. Long term capital gains are tax exempt, just like equity.
This debt oriented fund is close ended and has 80% in debt and 20% in equity. The huge proportion of debt ensures capital protection, as it is close ended in nature and the equity component helps in gaining decent returns in the stock markets. These funds cannot use the word "guaranteed" or "capital protection" .They can only be called as capital protection oriented. These funds purchase "AAA" rated debt or debt of very high quality, which helps the principal amounts grow over a fixed tenure. This protects the capital and the equity component generates returns, far in excess of its proportion, by investing in the options and futures market.
These are basically debt oriented mutual funds which invest 75-80% of the corpus in debt and the rest in equity. These funds can be further divided into a monthly income plan with a dividend option and one with a growth option.
The dividend option helps to generate income in the form of dividends, which are tax free in the hands of the investors
In the growth option no dividend is paid .The amounts are reinvested in the fund itself. This increases the value of the fund and huge returns are obtained on liquidation of these funds.
If the MIP is sold for a profit within a year, it is called a short term capital gain. These amounts are added to your income and taxed as per the income tax slab you fall under. Long term capital gains beyond a year, are taxed at 20% with indexation benefits.
Equity hybrids are taxed just like an equity mutual fund. If the equity hybrid is sold under a year, the short term capital gains are taxed at 15%.. If the equity hybrid is sold after a year there is no tax.
Debt hybrids are taxed just like a debt fund. Short term capital gains (gains under 3 years), are added to your taxable salary. Taxed as per income tax slab you fall under. Long term capital gains (gains over 3 years), are taxed at 20% with indexation.
26 December 2017, Tuesday
Investing in mutual funds is a great option if you want to earn handsome returns. If you are planning to invest in mutual funds, you should start as early as possible. Investing in mutual funds at a young age will give you the advantage of staying invested for long periods of tim...
18 November 2014, Tuesday
Generally, the more risk involved with an investment, the higher will be the potential return. As a result, the more risk you are willing to take, the more potential your savings have to grow over a long period. Before choosing an investment, you must make sure that you understand the investment, ...
18 November 2014, Tuesday
Inflation One of the steadiest risks involved in your investments is inflation. Inflation is the increase in the cost of living or decrease in the value of money, expressed as a percentage increase over last year's prices. Inflation is a simple concept that punishes the people who ignore it. Even...
18 July 2012, Wednesday
Formalities for a health insurance claim You can make a claim under a Health insurance policy in two ways : On a Cashless basis and A Reimbursement Claim On a Cashless basis : For a claim on cashless basis, your treatment must be only at a network hospital of the Third Party Administrator (TP...
14 March 2014, Friday
As the name suggests ELSS invests the whole corpus in equities. Proportions as high as 80-90% of equities are found in an Equity Linked Savings Schemes. It is a special kind of mutual fund that qualifies for tax benefits. Basically Equity Linked Savings Scheme is a mutual fund with a lock in peri...
07 January 2014, Tuesday
One of the most common reason for family feuds in India as in the rest of the World is faulty estate planning. Estate planning is a neglected topic in India mainly because of the emotions attached to it. A common reason people neglect to make a will or indulge in estate planning in their younger y...