Shopping or Investing: What are you choosing this Diwali?

Diwali is just around the corner and the festive mood is in the air. To a lot of people, Diwali means shopping. While some people spend hours getting the perfect clothes, others get their homes renovated, select gifts or get their routine shopping done.

For instance, let’s assume that you spend Rs. 3 lakh in making the down-payment for a new car and take a loan of Rs 5 lakh for the balance amount. Now, although you will get an asset in your name, the value of this asset will depreciate with time. You will also have to spend part of your future salary every month, paying off the car loan. If you choose to instead invest the same Rs. 3 lakh amount in a mutual fund your money can actually grow in value. For instance, had you invested in ICICI Prudential Equity & Debt Fund five years ago, your investment of Rs 3 lakh would have grown to Rs 6,30,102 – double in value!

You can keep the essence of Diwali intact even as you put some of your money in financial investments. You just need to select your purchases carefully. Instead of dedicating your entire Diwali budget to sweets, clothes and decorations, you can spend a portion of your money on financial products like equities, mutual funds and fixed deposits and reap the benefits of wealth creation. The addition of these financial products will not only give you good returns in future but will also inculcate a habit of disciplined investing in you.

Mutual Funds – The Best Investment Option This Diwali

A mutual fund  is an investment vehicle which collects money from various investors and invests it in equities and debt instruments. It is managed by a professional fund manager. It allows investors to benefit from professional fund management and a diversified portfolio of stocks and/or bonds for a small amount (as low as Rs 100).

Benefits of Investing In Mutual Funds

• Small Investment Amount: You can begin your mutual fund investment with an amount as low as Rs. 100.
• Diversification: Mutual funds invest in a variety of securities like equity, debt, gold, etc and that too across market capitalization. They thus, provide the benefit of investment diversification to investors.
• Professional Management: Mutual funds are managed by professionally trained fund managers who apply their expertise in making investment decisions with the aim to generate maximum returns to investors.
• Liquidity: Liquidity refers to the ability of the asset to get converted into cash with relative ease. Mutual funds are considered a liquid investment specially overnight funds and liquid funds.
• Tax Efficiency: Mutual funds attract tax on capital gains when you sell or redeem your mutual fund units. Equity mutual funds come with an annual tax exemption of Rs. 1 lakh on long-term capital gains (made when holding period is more than 1 year)