Investing your first salary is major coming of age moment. First I was plagued by the question "How do I invest my salary?", "What are the best investment options for salaried persons?" Then I came across investing in mutual funds that most of my colleagues were doing, and I decided to join the bandwagon.
Imagine this. When making a large pizza, you take several ingredients like the dough, sauces, vegetables, cheese, etc., and heat them in the oven. Then, when you take a slice of it, you hold small amounts of each ingredient. Mutual Funds work in a similar fashion. All the money pooled together by various investors into one large amount is invested into various securities, and each of the investors has a small ownership stake in the securities.And trust me, this is one of those scenarios where joining the crowd is one of the best decisions.
Here’s why:
Continuing the pizza analogy, each person has their taste and liking, and hence, there are a variety of pizzas available to cater accordingly. Similarly, every investor has a different kind of goal to achieve when they invest; hence, there are various mutual funds to help. They’re given below.
With traditional methods getting outdated, investing in mutual funds has become paperless and takes minimal time. In this regard, Fi Money absolutely nails it! All you need to do is:
Investing in mutual funds on Fi Money takes it to a whole new level and proves to be the best investment option for salaried persons. Most apps have something called SIPs or Systematic Investment Plans. On Fi Money, you have the option to automate your investing based on conditions chosen by you. You can, for example, invest in a mutual fund each time you shop online or order food online. These are called FIT Rules.
So I’ve already spoken about how convenient they are to invest in. Well, I’d like to point out some more benefits of this friendly neighbourhood instrument that makes it one of the best investment options for salaried person:
The table below should get rid of all the myths you probably have heard about investing in mutual funds.
Okay, so when you invest in mutual funds, you expect to get returns, right? These returns can be in two forms. Dividends and capital gains. Dividends are distributed by the company's surplus profits, and capital gain is realised when you sell the fund at a price higher than your purchase price. And as per the rules, all gains are taxable in India. Let’s see how
As per the amendment of the union budget 2020, dividends offered from mutual fund schemes are taxed in a classical manner. That means, the dividend received is added to the taxable income and taxed as per your tax slab.
In this case, the tax is determined based on the time period held and the type of mutual fund. The fund types are broadly equity, debt and hybrid. The table below summarises how they are taxed:
So there you have it. Although this is just the tip of the iceberg in investing and mutual funds, for any novice investor like you and me, this will go a long way in keeping our financial literacy updated.
All of this gets me thinking again: What if? Instead of splurging, I could have probably bought better-quality gifts if I put part of my first salary in a mutual fund and taken it out today.
There are a number of ways you can invest in mutual funds as a beginner. If you’ve just started earning a salary, then the ideal investment for you could be an ELSS fund or a tax-saver fund. These funds offer relatively good returns, and also save you tax up to ₹1,50,000 a year as per the old tax regime. Other than that, you can also consider investing in index funds - these are mutual funds that invest in an index like the Nifty. They cost very little to invest in, and give you reasonable returns over a long period of time.
Yes, you can. All mutual funds have the option of investing directly. On Fi Money, you can choose from 100s of mutual funds to invest in. All the fund details are available in an easy to understand manner. What’s more - you can automate your investing by setting up FIT
Mutual Funds are always a good investment for a number of reasons. The main reason being that mutual funds give you good returns, while also diversifying your investment across a number of stocks of varying growth rates and risk levels. Investing directly in the stock market requires you to research the companies you’re investing in, but mutual funds on the other hand, are managed by professionals who ensure you get the best value for your money. Mutual funds also invest in a number of different asset classes apart from stocks, such as bonds, gold and so on.
Financial experts recommend saving and investing at least 10-15% of your income for retirement. However, investing 50% of your salary may be too aggressive for some individuals, especially if they have other financial obligations such as debt payments or living expenses.
