What is FTF?
FTFs are debt schemes, where corpus is invested in fixed income securities, with different maturities ranging one month to five years. These are Close Ended Debt oriented mutual fund schemes.
What is the objective of FTF?
FTF seeks to generate regular income and / or capital appreciation by investing in wide range of debt and money market instruments. FTFs invest in a portfolio of securities normally having maturity duration in line with the maturity duration of the respective plan.
Why risk in FTFs is low?
There are two types of risk involved:
1. Credit Risk: It invests in AAA and AA debt securities. The risk is very low and diversified. Hence, the credit risk is very low.
2. Interest Rate Risk: The underlying debt instruments have the same maturity as the respective FTF. Hence, there is no buying and selling of the debt instruments which effectively mitigates the interest rate risk.
Why Invest in FTF?
• Less risky: Less risk of capital loss than equity funds as investment is in debt and money market instruments.
• Tax advantage: Being a debt-based scheme, dividend are tax free in the hands of investors, mutual fund has to pay Dividend Distribution Tax (DDT), while bank Fixed Deposits interest is fully taxable in investor's hands.
• Double indexation: Hold an investment for a little more than one year but get the benefit of the index multiple of two years.
• Low interest rate sensitivity: As securities are held till maturity, FTFs are not affected by interest rate volatility.
What is the tax liability on FTFs?
• The dividend from FTF is tax free in the hands of an individual investor.
• Redemption of investment held for less than a year will be short term gains and added to the investor's income and taxed at the investor's income tax slab rate.
• If investment is held for more than a year, investor has to pay either 10% capital gain tax without indexation or 20% with indexation.
How FTFs are better than Fixed Deposits?
• Fixed deposits are the closest and the most traditional investment avenue when it comes to comparison with FTFs.
• Since FTFs are mutual fund schemes, returns are not guaranteed.
• FTFs provide higher transparency and liquidity compare to Bank FD.
Investor Need At This Hour
• In the current market scenario wherein along with the country's growth, inflation is also moving northwards, a product that provides a hedge against inflation maintaining a prudent risk return balance is of paramount importance.
• Given that the current rise in short to medium tenor bond yields due to tight liquidity conditions and rate hikes by RBI, a product is required which captures these high yields with expectation of better bond scenario going forward on improving market conditions.
• Given the strong domestic growth environment, the medium term outlook is encouraging. In the near term, international events do create volatility, which could throw up opportunities to create high quality long term portfolios.
If you want to buy shares then open demat account in india
FTFs are debt schemes, where corpus is invested in fixed income securities, with different maturities ranging one month to five years. These are Close Ended Debt oriented mutual fund schemes.
What is the objective of FTF?
FTF seeks to generate regular income and / or capital appreciation by investing in wide range of debt and money market instruments. FTFs invest in a portfolio of securities normally having maturity duration in line with the maturity duration of the respective plan.
Why risk in FTFs is low?
There are two types of risk involved:
1. Credit Risk: It invests in AAA and AA debt securities. The risk is very low and diversified. Hence, the credit risk is very low.
2. Interest Rate Risk: The underlying debt instruments have the same maturity as the respective FTF. Hence, there is no buying and selling of the debt instruments which effectively mitigates the interest rate risk.
Why Invest in FTF?
• Less risky: Less risk of capital loss than equity funds as investment is in debt and money market instruments.
• Tax advantage: Being a debt-based scheme, dividend are tax free in the hands of investors, mutual fund has to pay Dividend Distribution Tax (DDT), while bank Fixed Deposits interest is fully taxable in investor's hands.
• Double indexation: Hold an investment for a little more than one year but get the benefit of the index multiple of two years.
• Low interest rate sensitivity: As securities are held till maturity, FTFs are not affected by interest rate volatility.
What is the tax liability on FTFs?
• The dividend from FTF is tax free in the hands of an individual investor.
• Redemption of investment held for less than a year will be short term gains and added to the investor's income and taxed at the investor's income tax slab rate.
• If investment is held for more than a year, investor has to pay either 10% capital gain tax without indexation or 20% with indexation.
How FTFs are better than Fixed Deposits?
• Fixed deposits are the closest and the most traditional investment avenue when it comes to comparison with FTFs.
• Since FTFs are mutual fund schemes, returns are not guaranteed.
• FTFs provide higher transparency and liquidity compare to Bank FD.
Investor Need At This Hour
• In the current market scenario wherein along with the country's growth, inflation is also moving northwards, a product that provides a hedge against inflation maintaining a prudent risk return balance is of paramount importance.
• Given that the current rise in short to medium tenor bond yields due to tight liquidity conditions and rate hikes by RBI, a product is required which captures these high yields with expectation of better bond scenario going forward on improving market conditions.
• Given the strong domestic growth environment, the medium term outlook is encouraging. In the near term, international events do create volatility, which could throw up opportunities to create high quality long term portfolios.
If you want to buy shares then open demat account in india
