Analysis Of Investment In Mutual Fund vs. FD [Taxation and Other Facts & Queries] #Best Education Page #Online Earning

hi everybody my name is Alina Machado

countered and I'm a freelancer I work

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do a job neither do I own a firm so this

is something different and I make money

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today's video is all about mutual funds

and fixed deposits okay and this video

is going to be a complete English video

because I make videos in English and

Hindi but this one is going to be in

English maybe I will consider putting in

the subtitles later or maybe I will make

this video again in Hindi but for now

this is going to be in English okay so

let's get into the video the first thing

that comes to our mind when we are

putting in money into a mutual fund is

the risk that is involved in a mutual

fund which is definitely not the case in

fixed deposits when we are putting in

our money in fixed deposits we know

exactly the duration and the amount of

interest that we are going to be earning

on that money right so that gives us a

little peace of mind but in case of

mutual funds your money is it does not

go into the fund with us your return

with a sure amount of the rate of return

I'm talking about so of course there is

a certain risk involved so that is why

whenever they advertise their mutual

funds on the TV or on the radio or

wherever they always have this

disclaimer that mutual funds are subject

to market risk and all that stuff but

the thing is that you know your money is

handled by highly professional and

experts of that field so when you put in

your money into a mutual fund there is a

fund manager absolutely trained and well

qualified to handle your money okay

these people are the experts of their

field they will never take the wrong

decision with your money so in the short

duration yes the money might give the

nav of the fund the net asset value of

the fund my

down or up okay but in the longer

duration everything gets averaged okay

so even if during some year there is a

fall in the money so I would say in 2018

most of the funds were not performing

very well because there was there were

certain change in the rules of the

income tax and there was some

categorization that had been done so

yeah things had gone a little bad for

the mutual funds why because because of

the government laws and the rules that

had come up okay so that particular year

the funds were not really performing

very well but they picked up they picked

up real quick and many many of the

mutual funds are performing nice now so

mutual fund manager coming back to

mutual fund managers these people I will

give you a couple of names so there is

mr. Mellish sadhana absolutely famous

for his skills for managing the funds

and then there is mr. Ezra Krishna Kumar

okay and apart from that there is john

key rama drinka raju who these people

are so famous and they are working with

different funds so my point over here is

not that just these people but there are

many such people who are working with a

lot of funds and they are doing a very

good job with your money if you put in

your money into a mutual fund okay so in

my opinion ever since I have started

investing in mutual funds yes there was

a duration of roughly 7 to 8 months when

my nav my my growth of the mutual fund

was absolutely negative okay it was all

a low for a very long duration like

seven eight months but it picked up and

trust me ever since it has picked up it

it does go down sometimes okay but then

it always manages to come back up so my

point is that two three things you have

to consider first there is a fund

manager okay

then second the the very important thing

that you have to consider is the time

duration when you put in your money for

a longer time duration the the

fluctuations in

money the average out okay and they end

up giving you a good result and the

third thing is that there is Sebby

okay so Sebby is the governing board

which has been appointed by the indian

government

Sebby regulates the mutual funds so

nobody can run away with your money that

is not going to happen

Sebby regulates these funds Sebby has

it's like the monitor of the class okay

it it always has its eyes on these AMC's

AMC's are the asset management companies

so whatever finds you you're of SBI

mutual fund or HDFC or Axis Bank these

these companies are called the AMC's

these are asset management companies

they manage the assets for you and your

asset as your investment so that is why

they are called AMC's so first point I

think I've made myself very clear mutual

funds they do sound risky but they are

handled by professionals and most of the

times we do not have enough knowledge to

make things work for ourselves when we

put in our money into shares and the

various other sectors right but but

these people have knowledge and these

people know what they are going to do

with your money

they they have the best team of advisors

working with them okay and they take

decisions collectively and they are they

are doing a fair responsible job with

your money you can trust second point of

differentiation is that fds they come

with a pre-specified rate of interest

okay you know what

amount of interest you're going to be

making correct there is going to be 7%

or 8% or whatever percent it is but on

the other hand mutual funds their rate

of return is fluctuating it fluctuates

along with the economy and as I don't

know if you know or not but India is

world's fastest growing economy if you

really want to benefit from the growth

of your economy of your own country you

really need to invest some money into

the shares and you should not do it

directly investing the money directly

into the shares of stock would be a

bigger risk why because you're not I

assuming that you're newer in to this

field so I don't think you really have

the kind of expertise it requires or the

kind of knowledge it requires for you to

take good decision with your money

so in that case putting in the money

into the mutual funds will actually help

you gain from the growth of your economy

from the growth of your country's

economy so when India grows up and it

goes up the economy goes up there is a

boom you also benefit out of it because

your money is invested with the

companies which are actually responsible

for the GDP of the country okay so you

don't do it directly by investing

directly into the share market you do it

through the mutual funds and that is

where the fund managers are going to be

taking decisions with your money right

so second point of difference is simple

the FDS have fixed rate of interest

mutual finds the rates they go up and

down they fluctuate and that is where

the real game is that is where you can

actually gain something out of it third

point of difference is that when you

take your money out of a fixed deposit

that is the premature withdrawal okay

when the period hasn't expired and you

take your money out what happens is you

have to pay a penalty and of course when

you pay a penalty you again you know you

end up losing the major chunk of

whatever you have made on your money by

that time so there is a penalty for

premature withdrawal on the other hand

when you talk about mutual funds mutual

funds there is an exit load you call it

the exit load okay but that is mostly

for the first one year so if you put in

your money into the mutual fund and you

take your money out or you withdraw the

money within a year that is when you

have to bear the exit load which is

generally one when one and a half

percent okay a maximum two percent I

don't think it goes beyond that but it

is somewhere in the range of one to two

percent okay that is only when you

withdraw within a period of one year or

so

okay so different funds have different

durations most of the funds are

come with one year duration for their

withdrawal exit load okay so you would

not want to withdraw the money within a

year if you've put in your money into

the mutual funds but if you withdraw

after that one year there is no exit

load so that is also where you really

gain out of putting your money into

mutual funds because you get to take the

advantage of the higher returns and at

the same time there is no penalty for

premature withdrawal another very

important point of difference between

fixed deposits and the mutual funds is

the way they are taxed and I'm sure a

lot of you really want to know how is

the two of them different from each

other over here in this aspect in case

of fixed deposits you earn an interest

income okay

so interest income is the portion that

is going to be taxed under the head

income from other sources whereas in

case of mutual funds you do not earn

interest okay what you earn is the

capital gain that you make when you sell

the mutual fund so when you put in your

money into the mutual fund that is your

cost okay and when you finally sell it

whatever gain is the difference between

the nav okay so if suppose I bought the

mutual fund in hundred rupees and when I

sold it it was at let's say a 230 okay

so to 30-100 that is the 130 rupees the

difference that is what is going to get

taxed under the mutual funds and it will

go under the head capital gains okay now

let's talk about the details of how

exactly interest income off fixed

deposits it's going to get taxed firstly

fixed deposits get taxed every year so

whenever your interest is credited to

your account and in case that interest

exceeds ten thousand rupees that is when

ten percent of the interest will be

deducted as TDs okay and in case you

have not provided your pan to the bank

in that case it is going to be twenty

percent twenty percent of the interest

income is going to be taxed it's going

to be did

third as tedious by the bank so let's

get into the detail of how exactly you

will be taxed with the help of an

example if you suppose make a lakh

rupees in a year that was your income of

the entire year you fall in the bracket

of 30 percent okay

so 30 percent and if suppose you make

one lakh rupees one lakh rupees as your

interest income that is when 30 percent

of 1 lakh that is 30 thousand rupees and

with 4 percent as the education says

that is going to be twelve hundred

rupees so twelve hundred plus thirty

thousand thirty one thousand two hundred

will be your taxation on one lakh rupees

of your interest income of the AFT in

your and I've already told you about the

tedious deduction so in case your

interest that is getting credited to

your account is more than ten thousand

you will be getting tax deducted at it

at the rate of ten percent and if no pan

card twenty percent okay how can you

avoid that so there is this case where

your total income falls within to last

fifty thousand okay so - laughs fifty

thousand is the exemption limit and you

do not have to pay any tax if you fall

in the income group of less than 2 lakh

fifty thousand now in that case what you

have to do is you have to fill up the

form 15g okay and form 15 G will be

filled up and sent to the bank by you

and in case you're a senior citizen you

will have to fill up form 15 H okay so

I'm considering most of you watching the

video will be not the senior citizens so

15 G is the form you need to fill up and

send to the bank so that they do not do

it after your TDS okay and if you do not

fill up your form and submit they will

be deducting TDs at your income even if

your total income for the year is less

than 2 lakh 50 thousand that is when you

own nothing to the government as the tax

okay coming back to mutual funds how

does it exactly work in the case of

mutual funds in case of new

actual funds there is a category of LTC

G that is long-term capital gains and

there is this category of s TCG which is

the short term capital gains so let me

tell you there are broadly two or three

categories first is your debt funds in

case on debt funds LTC G is 36 months so

you will if you invest into debt fund

you will have to hold that find that

money into the debt fund for a period of

36 months which is three years okay

in case you will draw your money before

that period of three years you will have

to be paying the tax in the bracket of

short term capital gains and you don't

want that I will come to that later

okay so LTC G is beneficial as compared

to s TCG why because s TCG rate is 15%

but L TCG rate is 10% okay so if you

want to be falling into the category of

LTC G for your capital gain that you

make on a mutual fund you would want to

hold your mutual funds for at least a

period of three years if you have the

debt fund running for you but in case of

equity fund or in case of balanced fund

this period of thirty six months is

reduced to 12 months okay it's just a

period of one year for which you have to

hold your in your your Holdings your

units so if you hold your units for 12

months in case of equity fund that is

when you will be falling into the

category of LTC G again so I will repeat

myself for equity and balanced fund it

is going to be 12 months for LTC G but

in case of get fund it's going to be 36

months okay and anything less than that

in both of these cases is going to be s

TC g & s TCG is C de-seed up Andrew % ck

but in case of long-term capital gains

it's going to be 10% of whatever you

make on your income there is a way you

can save your capital gain tax by

investing into e LS s ELSS is equity

linked saving scheme

so these are again mutual funds in which

if you put your money and of course

there is a holding period of three years

involved you will have to hold your

money for at least you will have to stay

invested into the fund for at least

three years and let me be clear these

guidelines are for now so tax system

changes every year so things might

change but for now this is what is

absolutely true okay so if you invest

into ELSS you will have to stay invested

for three years and after that you can

withdraw your money for first one lakh

rupees of the game that you're making is

going to be absolutely tax-free for you

okay and beyond that one lakh it's going

to be LT CG but without the benefit of

indexation what is indexation and all

that stuff I'm not going to talk in this

video because I know that will be like

over-pouring of information which I

don't want to do right now so yeah so

you'll be paying 10% 10% on whatever you

make over and above one lakh of your

capital gain LT CG is far less heavy on

the pocket as compared to st CG if you

buy into mutual funds you would want to

stay invested in them for 12 months or

36 months respectively if you are going

to put your money into equity balanced

are you going to be putting your money

into big fines respectively so watch for

yourself after talking about the

taxation let's talk about the wealth

creation if you want to really create

wealth for yourself even Warren Buffet

says that the best way you can create

wealth for yourself is by investing into

mutual funds fixed deposits are never

going to create wealth for you why

because they will barely beat the

inflation whatever your going to make on

a fixed deposit that is the rates are

really less these days okay

whatever you are going to be making on

fixed deposits the interest income will

barely match up to the inflation that is

happening every year so when you

withdraw your money after four years

five years from the FT

that is when it matures it will hardly

earn you anything real because whatever

it will earn you will be as good as

saying that it was just going into the

the inflation that has happened over the

period of four or five years so I don't

think there is any point if you put in

your money into a fixed deposit in order

to create wealth but yes it's a safe

measure it's a safe deposit and that is

where you invest when you want your

money to be 100% sure shot and nothing

reducing in the period and you still

want to make some amount of interest so

fixed deposits and look is good in that

case otherwise mutual funds in the same

period of four or five years can really

give you a return of roughly sixteen

twenty percent there are a lot of such

funds if you do a little bit of research

a lot of such funds are there in the

market which are on an average bare

minimum giving you twelve thirteen

percent which is far above a fixed

deposit so the wealth creation aspect is

definitely one point of major difference

between these two another point is that

fixed deposit investments are mostly for

conservative investors so if you have a

conservative approach which is not a bad

thing to have it is just plain safe so

in case you have a conservative approach

fixed deposits it's your thing but if

you want to play it a little hard and

you want to take you have a appetite for

a little risk and for a higher risk

mutual funds is your thing because that

is when you will be actually making very

good money out of your investment see

when you are a conservative investor six

point seven to seven or seven and a half

maximum eight percent is what you earn

on a fixed deposit but at the same time

your money see if you know that this is

the minimum and this is the maximum that

you're getting but in case of mutual

funds the rates they fluctuate the

returns that I'm talking about they

fluctuate with yours but because there

is

a risk involved the return is also

mostly good even if you make a 12% on

your mutual fund investment that is

roughly four to five percent more than

your fixed deposit income and if you

choose if you make a good choice and you

invest after some amount of research and

checking into the credit ratings of the

finds and all which is not very

difficult these days you just have to

sit with your laptop or your or your

computer for a while and talk to a few

people who are already invested into

these funds I don't think it is going to

take you more than a couple of days or a

week to find out a good fund for

yourself where you can put in your money

to make some good amount out of you have

to remember that safety comes at the

price of lesser returns so if you want

to play it conservative you will have to

bear the burden of lesser returns last

thing that I will want to say over here

is that you know most of us are into

jobs and most of us do not get the

luxury of investing our time or our

money into a business or you know trying

out something new our venturing into

something new taking some risk in life I

think this is one place you can satisfy

your hunger for taking risk and I think

this is a very important point that I'm

making right now you want to do

something with your money and you want

to try out something nice and you have

that urge to take risk in life I think

this is the best place you can actually

put in your money and let your money

work for you

this is where you get a chance to

actually take a risk without really

quitting your job or taking a hit on

your income so I that is just my

suggestion I think you would want to do

your research in case you want to find

out about good funds or you want to find

out about where to invest your money

into there is this wonderful app called

ET money is going to that app and it

will give you a very fair idea as to

where you should be putting your money

and they will manage the money for you

and apart from that then you have your

money control money control app is

pretty good which will take you some

time to actually understand how there

are things on all the features on the

app work give it some time don't expect

you to don't expect yourself to

understand everything in the first day

or first week no no no it's going to

take a while it's going to take you

roughly a month or so before you

actually start getting a hang of the

things how exactly they work I think I

am mostly done here I am a mutual fund

person and I know it involves a little

bit of risk but as I told you there is

no gain without risk okay and in the

longer duration if your age is not too

much and if you have time on your hand

I think mutual funds is not risky things

have been working well for Indian

economy so I would definitely want to

take my chance with my money into mutual

funds so this was it for today and I

hope you liked the video and please

share your thoughts on the comments I

love reading your comments I am a

complete fan of what ever you write to

me I pick most of my video ideas from

your comments give me some new ideas

share with me what you want to make me

talk on and I will definitely write that

down in my diary and I will come up with

a nice video I hope you like my today's

effort if you did please like the video

share with your friends take wise

decisions with your money and I will see

you very soon again on a video till then

bye

and take care

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