Short-Term Funds Can Give Better Profits Than FDs
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    • Short-term funds can give better profits than FDs

    Vicky Tiwari

    Sr. SEO Executive
    Most investors combine mutual funds with long-term investments, which is true for most cases. However, pension funds also offer lucrative investment options in the short term. Some of these funds include liquid, ultra short-term funds and income funds, which invest in call money market and debt instruments such as government bonds, treasury bills, certificates of deposit, commercial paper and documents corporate debt.

    "Currently, investments in debt funds are short-term interest rates as profitable short-term problems of government are higher than long rates," said Chavan Yadnesh, fund manager values fixed income, Mirae Asset Global Investment Management. According to Bloomberg, the difference between 10 years (8.2%) and one year (8.17%) gold paper was reduced to about 0.03% on Aug. 10 against a 1.41 difference % a year. This is due to steady increase in the prime lending rate by RBI (11 times in the last 16 months) and the resulting liquidity tight and fiscal effort.

    BETTER THAN FDs:
    If you want to invest for periods ranging from one month to two years, short-term mutual funds are a better investment option than Fixed Deposits (FDs). "Usually, the SDS does not offer very high performance for a short time. Top of funds, by contrast, can yield 8.9% per year over a short period of 1-6 months," Singh said Ashwinder , head, wealth management, wealth advisory values ​​Fullerton. Funds offer better returns because they can beat their portfolios and invest in different types of securities that have a variable length of maturity.

    These funds are also more liquid than their output, the load is usually zero or less than the penalty imposed on premature withdrawal soon, which is 1-2%. In addition, short-term funds are also tax efficient than the near future, at least until the direct taxes code (DTC) will enter into force on 1 April 2012. Although derived from the near future, he added his income and taxed at income tax slabs, the possibility of growth of debt funds, only short-term capital gains are taxed tax slab Fri In the long-term capital gains are taxed at both 10% (index) or 20% (without indexation). "Dividend Option to produce a higher return," said Jayant Pai, vice president, Parag Parikh Financial Advisory Services.

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    But if you invest in a fund now, it will probably be after the first maturity in April 2012. According to the DTC, there will be no distinction between short and long term capital gains non-equity funds. The capital gain will be added to the income of the investor and taxed at the applicable tax slabs.

    Source: [ET]
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