Author: financeguide

SIP stands for Systematic Investment Plan, it is an automated method of investing in mutual funds. You select a mutual fund, an amount and a date. On your selected date, the predecided amount is deducted from your account and equivalent units of the selected mutual fund are allocated to you. All this happens without any manual intervention……….

A mutual fund is a fund created from a pool of money collected from a large number of investors. This pool of money is managed by a professional fund manager. The money of this fund is invested in various assets to generate income/capital gains for the investors. The assets in which money is invested is determined on the basis of pre-agreed and declared objectives of the fund. For example, an equity fund invests majority of the money in stocks. ……..

Index investing is a passive investment strategy. The investor chooses an index like NIFTY or SENSEX. Money is then invested in stocks listed on the index. The investment is made in the individual stocks in the exact same proportion as the index. The aim of this method of investment is to mimic the performance of the index. Index funds are the easiest and most commonly used method to implement index investment………

The dividends paid are not an extra benefit. In reality, dividend results in less appreciation of Net Asset Value (NAV). The dividend is also marketed as being a tax-free income. But you might end up paying more taxes. The fund house distributes the dividend after deducting the Dividend Distribution Tax (DDT). Dividend option being a source of regular income is also a myth. The fund house is not bound to distribute dividend. In cases when fund’s earnings are negative or below a certain level, there might be zero dividends distributed………..