Opt for Consider Mutual Fund growth option get compounding benefits

Tax Saving Mutual Funds Online

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THERE are times when careful evaluation is required for investor to choose one option over the other. For investors, the question is whether to look at the dividend option present in the mutual funds, compared with the growth option. Many investors prefer the former, but this does not mean to be the best choice under all circumstances.

There are several benefits in using the growth option present for mutual funds, and hence, this will be a feature that has to be used properly. Here are a few conditions when this would be possible.

Long-term requirement: One situation when it is essential to use the growth option is when there is a long time-period present for the individual for their planning and investment.

This gives them the required amount of time for accumulating a large amount. This is possible using the growth option, wherein, they can invest the required amount in one or more instalments and then forget about it for the available time period.

This also ensures that the amount grows over a period of time without any interference, making the achievement of the objective easier. The best part of the entire exercise is that it can be completed with minimum effort.

Compounding: If the target of the investor is to ensure that there is a compounding of the invested amount without any access to the gains that are earned by the fund, then, they need to take a closer look at the growth option.

The route allows them to accumulate the gains on the investment, which keep adding over the years.

Over a period of time, the entire benefit of compounding is visible for the investor, and hence, there is a route, whereby, they are able to achieve some of their financial goals easily.

It is not possible to take the dividends and then reinvest them over a period of time, as this requires a lot of dedication and effort and it is possible that the amounts are diverted for other uses. With the growth option, all these factors are automatically taken care of.

Tax benefit: The growth option in the mutual fund is also beneficial or favourable when there is a tax benefit that can be obtained by the long-term investments. There are situations where the long term capital tax gains would be beneficial in terms of a lower rate or a zero rate, compared with some other mode of earning like a dividend.

When this is present, there is no specific gain of getting a payout and then starting the holding period right from zero for the new investment. So, in situations where the long-term tax benefit is larger, this route can be chosen, which will ensure that the tax benefit is utilised. This will ensure that the net impact is larger for the individual.

Uncertainty: There are times when there is great uncertainty on the regulatory front. This happens, as it is not very clear as to what will be the position when it comes to the question of the exact situation for different options. So, it would be better to ensure that the route with the least amount of risk is followed.

Under this situation, there is very little risk in adopting the growth option, where the amount will just keep on accumulating. The investor has some say here in terms of choosing the time of exit, and this can be done keeping several other factors in mind. This will help them to make a better choice and hence a better option to use. 

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Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

 

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Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

 

Download Tax Saving Mutual Fund Application Forms from all AMCs

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These Application Forms can be used for buying regular mutual funds also

 

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

1. HDFC TaxSaver
2. ICICI Prudential Tax Plan
3. DSP BlackRock Tax Saver Fund
4. Birla Sun Life Tax Relief '96
5. Reliance Tax Saver (ELSS) Fund
6. IDFC Tax Advantage (ELSS) Fund
7. SBI Magnum Tax Gain Scheme 1993
8. Sundaram Tax Saver

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