Choosing the Best Tax Mutual Funds for Savings

Mar 4 12:08 2010 Jaish DeSouza Print This Article

Tax mutual fund assists in diversification of the investments and cannot be easily liquidated. investing in tax mutual funds needs to be done with careful research and planning. Investors, if in doubt can take the assistance of financial advisors who have experience in dealing with tax saving mutual funds.

Tax mutual saving funds are those that provide tax benefits under the section 80C of the income tax act. Tax mutual fund assists in diversification of the investments and cannot be easily liquidated. One of the biggest advantages of these is that upon investing in these funds,Guest Posting investors get a rebate at the end of the year.

Why Select Tax Mutual Funds?

When there are so many options available for investors, a number of questions do arise in the minds of customers in regard to why to go in for tax saving funds. Some of the reasons why these funds are so popular are as follows:

Very Lucrative: Investors who decide to invest in tax savings can save sufficient amount of tax money on these funds and at the same time make money from it. The reason for this is because tax saving mutual fund have a good rate of return, thus making them very lucrative in nature.

Outperform Other Funds: Another reason why to go in for such types of fund is because they are known to outperform other bonds and stocks by a great margin. According to research and surveys, it was found that these funds are the best performing funds in the market.

Selection of Tax Mutual Funds

Investors planning of investing in such mutual funds might want to take into some factors for considerations. These factors are as follows:

Performance: Evaluation of these funds based on their performance in the market is a critical parameter. Investors need to check on the NAV returns in which the fund may redeem itself for better tax returns. The fund must be up to the standards put in by the stock exchange companies or the peer group.

Approach To Investments: The investment style and approach of the fund managers too plays an important role, since it assists in making the necessary investment decisions. Mutual funds can either be managed with a strong individualistic approach or with the help of strong systems.

Many of the investors prefer to go in for strong system approach since it gives them some comfort regarding the risk levels associated with the fund.

Risk Returns and Volatility: The volatility that can be used to gauge the NAV performance is standard deviation. This proves to be an effective tool to now the performance of the tax mutual funds in the market.

Similarly investors can also look in at investments that have rewarded existing investors with more per unit of risk that can be calculated with the help of Sharpe ratio. Therefore in simple words, a low standard deviation and a high Sharpe ratio is an ideal mutual fund investment.

Conclusion

In a nutshell we can conclude that investing in tax mutual funds needs to be done with careful research and planning. Investors, if in doubt can take the assistance of financial advisors who have experience in dealing with tax saving mutual funds. Some other parameters that investors can look into are also the track record of the companies and their entry load.

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Jaish DeSouza
Jaish DeSouza

Best mutual fund schemes - fixed maturity plan, growth mutual fund, debt mutual fund, bank mutual funds and exchange traded fund.

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