Investors in India are increasingly breaking their fixed deposits to invest in mutual funds and the stock market, influenced by the country’s strong growth prospects and stock market performance. Bhuvanaa Shreeram, Co-Founder and Head of Financial Planning at House of Alpha Investment Advisers, notes that this trend is particularly pronounced during bull markets, driven by the potential for higher returns despite increased risks. Systematic Investment Plans (SIPs) in mutual funds are gaining popularity, especially among younger and middle-aged investors, due to their disciplined investment approach and the benefits of rupee cost averaging, which lessens the impact of market volatility.
The total inflow into various SIPs of mutual funds in 2023 reached approximately Rs 1.83 lakh crore, with younger investors increasingly favoring this form of investment. Shreeram emphasizes that the best time to invest in mutual funds or SIPs is subjective and depends on personal financial goals. However, starting early and investing during market dips can maximize returns through rupee-cost averaging. Typically, 8-10 SIP schemes are recommended for investors, depending on their investment capacity, financial goals, and desired diversification.
Taxation for mutual funds varies based on the type of fund. Equity funds are subject to capital gains tax, while debt funds are taxed according to the income tax slab if withdrawn before three years. Regarding fixed deposits, Indian banks have raised interest rates, which now range between 3-7%, depending on the tenure. Fixed deposits are preferred during economic uncertainties or low stock market performance due to their safety and predictability. They are ideal for conservative investors, retirees, or those seeking stable income without exposure to market volatility. Interest on fixed deposits is taxable as per the individual’s income tax slab, and TDS is deductible on the interest earned.
This shift from fixed deposits to mutual funds and stock markets indicates a changing investment landscape in India, with investors increasingly seeking higher yields and showing confidence in the Indian economy and stock markets [❞] [❞] [❞] [❞] [❞] [❞].
About The Author
