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Mutual Funds Vs Post Office Schemes

There is no upper limit applicable on post office schemes, enabling investors to invest any amount of money as per their financial goals. These schemes offer guaranteed returns through interests of up to 8.7%. The premature withdrawal, chargeable at a penalty of 2%, ensures liquidity. Interest earned on post office schemes is taxable as per the investor’s income tax slab. Monthly deposits made towards these schemes generate dividends as per the applicable rate of interest, serving as a reliable source of monthly income.

The varied range of mutual fund schemes meets the unique investment objectives of every investor. Mutual fund investments made through Systematic Investment Plan (SIP) ensures that individuals can start investing with a nominal amount of Rs. 500. Investors can withdraw from their mutual fund scheme by paying an exit charge of 1% before the stipulated period.

Difference between Mutual Funds & Post Office Schemes

ParametersMutual FundPost Office
Guaranteed ReturnsReturns are not guaranteed because they are exposed to market risks.Offers guaranteed returns through interest rates of up to 8.7%.
LiquidityOffers liquidity by enabling investors to withdraw against 1% exit charge.Premature withdrawal is chargeable at 2% penalty.
Applicable taxesDividends are subject to a distribution tax of 13.84%. When fund units are sold within a year, it is taxable as per your personal income tax slab. For fund units sold after a year, the Long Term Capital Gains (LTCG) tax of 10% is applicable.Earned interest is taxable as per your personal income tax slab.
Investment limitNo upper limit.No upper limit applicable.
Monthly investment optionEasy monthly instalments for Systematic Investment Plan (SIP), starting as low as Rs. 500.Monthly deposit applicable.

Returns in Mutual Funds Vs Post Office Schemes

Returns from Mutual Funds

  • Returns are not guaranteed because they are exposed to fluctuations and inflationary effects of the capital market.
  • Dividends are subject to a distribution tax of 13.84%. For fund units that are sold within a year of its purchase, it is taxable as per the income tax slab that the investor belongs to. Fund units that are sold after a year of its purchase attract the Long Term Capital Gains (LTCG) tax at the rate of 10%.

Returns from Post Office Scheme

  • Offers guaranteed returns through annualized returns which currently is 8.7%.
  • Returns are decided on the basis of earned interest that is taxable as per your personal income tax slab.

Why Invest in a Post Office Scheme?

  • Offers the flexibility to invest any amount that an investor wants as no upper limit is applicable.
  • Monthly deposits provide returns as per the applicable interest rate and acts as a reliable source of monthly income.
  • Offers guaranteed returns through interest which currently is up to 8.7%.
  • Premature withdrawal is chargeable at penalty of 2%.
  • Earned interest is taxable as per your personal income tax slab.

Why Invest in Mutual Funds?

  • There is a wide range of mutual fund schemes that investors can select from, based on their unique investment objectives and risk appetites. Mutual funds are for everyone, be it seasoned investors or beginners. These schemes differ based on their investment tenure, sectors or industries that they invest in, market caps, market risks that they are exposed to, etc.
  • Beginners can invest in mutual funds through Systematic Investment Plan (SIP), which offers them the convenience of starting with an amount as small as Rs. 500.
  • Enables investors to withdraw the accumulated corpus by paying just 1% as exit charge.
  • Dividends are subject to a distribution tax of 13.84%. Units of mutual fund schemes that are sold within a year of them being purchased are taxed according to their personal income tax slab. For fund units sold after a year of their purchase, they attract Long Term Capital Gains (LTCG) tax at an interest rate of 10%.

FAQs on Mutual Funds Vs Post Office Schemes

Where to invest Post office schemes or mutual funds?

Every individual has their own financial objectives and risk appetites that should determine their investment options.

Which post office scheme is best?

You can consider the following post office schemes, as per your eligibility:

  • Post Office Monthly Income Scheme Account (MIS)
  • 15-Year Public Provident Fund Account (PPF)
  • 5-Year Post Office Recurring Deposit Account (RD)
  • Sukanya Samriddhi Accounts
  • Senior Citizen Savings Scheme (SCSS)

Is it good to invest in mutual funds now?

Mutual fund is one of the best investment options, irrespective of the time you want to invest in it. The wide range of mutual funds caters to varied investment objectives and risk appetites of investors.

Is it worth it to invest in post office scheme?

Here are some factors that make investing in a post office scheme an effective investment option:

  • Ensures guaranteed returns through interest which currently is up to 8.7%.
  • Premature withdrawal is charged at penalty of 2%.
  • Earned interest is taxable as per your personal income tax slab.
  • Offers the flexibility to invest any amount that you want as no upper limit is applicable.
  • Monthly deposits provide returns as per the applicable interest rate and acts as a stable source of monthly income.

Which is the best mutual fund investment for long term?

The following are some of the top long-term mutual fund investment schemes:

  • ICICI Focussed Bluechip Fund
  • Axis Bluechip Fund
  • Mirae Asset India Opportunity Fund
  • ABSL Frontline Equity Fund

Can you lose your money in a mutual fund?

Mutual fund investments are exposed to market risks, which may lead to losses. However, keeping a close tab on the performance of funds in your portfolio will enable to avert losses due to market risks, unless in the case of an unforeseen inflation. Funds that are not performing well should be switched with other funds to prevent risks and ensure balance in the portfolio.

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