Comprising of more than US $680 billion in assets under management globally DWS Scudder is the retail brand name in the U.S. of Deutsche Asset Management a global asset management division of the Deutsche Bank. DWS Scudder offers a comprehensive and diverse range of products. The company’s products include variable annuities, defined contribution retirement plans, alternative investments, individual retirement accounts (IRAs), and retail mutual funds. The company’s services are provided to large corporations, financial institutions, government and foundations and individual investors. 

These comprehensive products are available to the investor through financial intermediaries, retirement plans and wrap programs with a strong commitment from DWS Scudder towards superior performance, innovations and leadership in intellectual capital. 


DWS Health Care Fund: by investing at least 80% of total assets in common stocks of companies in the health care sector, the fund seeks long-term growth of capital. The companies in whose stocks are to be invested in should have half of their assets or derive at least half of their revenue from that sector (health care). Such industries include medical products and supplies, pharmaceuticals, biotechnology etc. The securities, the fund primarily invests in is of U.S. companies though, some foreign companies will be considered as well. 


Investors can benefit potentially from a combination of DWS funds. DWS has introduced its DWS Core Plus Allocation Fund; a combination of DWS mutual funds which, seeks to enhance long-term returns while managing the risk through intellectual asset allocation that responds to trends in the global markets. The fund consists of DWS Dreman Small Cap Value Fund, DWS Dreman High Return Equity Fund, DWS Core Fixed Income Fund, DWS Global Thematic Fund and DWS Capital Growth Fund. Managed by Deutsche Asset Management Quantitative Strategies the fund is led by portfolio managers Robert Wang and Inna Okounkova. 


DWS Capital Growth Fund: this is a large growth category of investment fund having a below average risk associated with it. This fund earns 3 stars under the MorningStar Rating Methodology and has generated average returns but has been less volatile as compared to most of its peers. For a large growth fund the asset allocation of the fund is fairly standard with 96.11% in U.S. stocks and the balance in foreign stocks (2.99) 


DWS Scudder, a division of deutsche Asset Management launched two new open end mutual funds; DWS international Value Opportunities Fund – this fund invests in large-cap international equities which, focus on value stocks sporting a stable record of profitability. The fund investment seeks long-term capital appreciation, current income being secondary. 80% of the fund’s assets are for investment in stocks and other securities of companies in developed countries. 20% of its assets may be invested in cash equivalents, fixed income securities and U.S. stocks. This fund may also invest a portion of its assets in the emerging markets of the Middle East, Latin America, Europe, Africa and Asia. 

DWS RREEF Global Real Estate Securities Fund – this fund invests in international and domestic equity securities of Real Estate Investment Trusts (REITs) and those companies engaged in the real estate industry, laying emphasis on stock appreciation and having a record of paying out dividends. The fund portfolio is managed by RREEF America LLC, leading managers for both private and public real estate. 

To learn more about DWS mutual funds go to: http://www.dws-scudder.com/t/index.jhtml?content=/t/about/index.jhtml 





Established in 1951 with its headquarters in New York City, Dreyfus Corporation is one of the nations top mutual fund companies managing over $190 billion spread under more then 200 mutual fund portfolios nationwide. It is a wholly owned subsidiary of Mellon Financial Corporation, a global financial services company.
The Dreyfus lion has come to symbolize for many investors trust, quality and integrity. Being a part of Mellon Financial Corporation, of the world’s largest asset managers and having access to the resources and expertise of world class investment managers, Dreyfus Corporation provides a wide range of quality investment operations that include load and no-load mutual funds, retirement products, separate account portfolios and cash management tools.
Dreyfus Mutual Funds offer the investor a complete line-up of equity, bonds and money market funds, in order to round off almost any type of asset allocation plan and also help diversify any portfolio.
Dreyfus Mutual Funds seek to provide capital growth and in order to pursue these goals, the fund primarily invests in the common stock of those companies in the opinion of the funds manager meets the investment standards of the company and also conduct their businesses in a manner such that it contributes to the enhancement of the quality of life in America. The fund’s investment strategy of Dreyfus combines a disciplined investment process, fundamental analysis and risk management along with social investment process.
Dreyfus Money Market Funds are taxable and tax-exempt and they include retail funds, cash management funds, general funds and institutional funds. All these funds invest in short-term securities seeking a high current income, favoring stability over growth.
The Dreyfus Retail Money Market Fund is a comprehensive line-up of taxable and tax exempt market funds that are offered directly to retail consumers.
Cash Management Funds: these are high quality money market mutual funds customized specifically for institutional investors; help satisfy those seeking a high level of current income, having liquidity and convenience.
General Money Market Funds: these high-quality money market mutual funds were developed for both institutions and retail consumers in order to help meet a growing need for conservative money market funds.
Institutional Money Market Funds: these were developed specifically for both institutional as well as retail clients in order to help meet the investor’s need for a conservative programme.
Dreyfus Premier Family Funds is a comprehensive line-up of equity and bonds that are primarily available through investment professionals. The equity funds invest chiefly in common stocks (small, mid or large cap companies, domestic or globally). Bond funds on the other hand are generally seeking high current income and invest in the debt obligation issued by municipalities, corporations or the U.S. Government. They differ in maturities and credit ratings thereby affecting the risk/reward potential of a fund.
According to The Street.com Ratings’ recently released mutual fund family survey Dreyfus Corporation has been rated third among the fund families (more than 10,000 equity and balanced mutual funds were ranked by the survey and it awarded its highest A+ rating to individual funds having the best record for maximizing performance while minimizing risk). Of the top 200 slots, Dreyfus funds won 11 beating all but two competitors. Dreyfus exhibited particularly strength in the international markets, with a 14th ranking over all and an A+ rating for Dreyfus Premier International Small Cap fund (R).  Dreyfus Premier International Small Cap fund (all Classes) were ranked in the top 25. However, this fund is presently closed to new investors. To learn more about the company and its various mutual funds go to: http://www.dreyfus.com/content/dr/control?Content=/docs/mfc/dreyfus-funds/index.jsp

Columbia Mutual Funds

Disciplined investing, client focus, powerful resources and proprietary research are the driving force behind Columbia Management, one of the world’s largest and experienced investment companies. A primary investment management division of Bank of America Corporation, Columbia Management is an embodiment of diverse investment strategies, effective solutions and a trusted partnership with clients all of which are required for successful investment management.
Few investors have the resources or the time required to keep a constant watch on their investments and market fluctuations. Columbia Management mutual funds put a team of full-time professional money managers at the investor’s service. Based on their extensive ongoing research of the economy, the markets and the individual stocks and bonds, the managers make decisions for investment.
Columbia Management’s wide variety of investments has something to choose from for every type of investor. With over 80 individual mutual funds that cover nearly every investment category such as growth, income, international etc.
Columbia’s Life Goal Portfolios (comprising of four) is a complete and diversified choice for investment comprising of carefully selected mutual fund. For investors not averse to taking on high risk in exchange for a long-term growth potential and with a long investment time horizon then, Columbia LifeGoal Growth Portfolio.
Columbia Acorn Z (ACRNX): according to MorningStar’s rating methodology this fund earns 5 stars which, translates into excellently generated returns from the fund when compared to other funds in the same category (mid-cap growth). The risk associated with this fund is below average and has an expense ratio percentage of 0.74. Being less volatile than most of its peers, has helped the fund perform with excellent returns. Over a five year period the fund has an outstanding performance being ranked 1st in its category.  The focus is on five year returns as longer records have a better predictive power than shorter records. Most of the funds’ holdings are in the service sector (52.07%), manufacturing (30.12%) and the balance in information (17.81%). The asset allocation for the fund is chiefly in U.S. stocks (80.60%) the rest being in foreign stocks (13.06) and cash (5.64).
Columbia Strategic Investor Z (CSVFX): when compared to other funds in the same category (mid-cap blend) this fund has generated above-average returns considering the risk it has taken on (below average). Therefore, this fund has been less volatile than most others in the same category. It has earned a 4 star rating under the MorningStar’s rating methodology. Asset allocation of this fund is mainly in domestic stocks (U.S. stocks 79.30%) and the balance in foreign stock (19.78%) and cash (0.91%). Being a domestic equity fund it has a substantial exposure to foreign stocks. This fact should be carefully considered while structuring your portfolio in order to make sure you don’t have too much foreign exposure than you want. For more information on mutual funds from Columbia Management go to: http://www.columbiafunds.com/home.htm
Investing for future goals like retirement is made simpler with Target date funds. These target date funds are managed to a specific year in the future and can be a well diversified portfolio of stock funds, bond funds and also cash. Using an aggressive asset allocation of funds for target dates well into the future and a more conservative asset allocation for dates close to retirement date, portfolio managers adjust the mix of investments. To learn more on this go to:


Dedicated to building solutions for its clients Aim Investments offers exceptional products and services through its multiple investment portfolios such as mutual funds, retirement funds, exchange-traded funds, cash management, college savings plan etc.
Founded in 1976, AIM has earned its reputation as one of the leading Investment Management firms in the United States through decades of systematic planning and disciplined growth. Aim Investment holds the belief that the investor can benefit significantly from the advice and guidance of professionals. These professionals help create investment plans in order to meet the client’s unique goals.
Aim Mutual Funds offer money management in order to enable you achieve financial goals, irrespective of whether you are planning your child’s education, saving for retirement or even putting aside for another goal. Aim mutual funds are solid performers.
Aim Leisure Inv. (FLISX); the investment objective of this fund is to seek capital growth. When, compared to other funds in its category (large growth) this fund has generated excellent returns given the risk (average) and has earned a 5 star rating from Morningstar ratings.
The fund has given an outstanding performance over the last five years – the focus is on a five year period of returns as longer periods have greater predictive power and accuracy as compared to shorter periods. The majority of asset allocation for this fund is in domestic stocks (U.S. stocks) comprising of about 75%, the balance in foreign stocks.

Aim Moderate Growth Allocation Fund: This is an asset allocation category of investment where, it seeks to balance the rewards and risk in a portfolio by assigning specific amounts in the asset classes like bonds, stocks and cash depending on the investors financial goals and risk tolerance. It is intended for the investor willing to take moderate risk tolerance. The objective of the fund is that it seeks to provide a long-term growth of capital that is consistent with a higher level of risk relative to the stock market. 
Asset allocation is the primary tool for achieving an investor’s ideal balance of risk and reward. The fund invests in 13 underlying Aim funds – 11 stock funds representing 80% of the portfolio’s target allocation, 2 bond funds which make for 20 of he portfolio’s target allocation.

AIM Money Market Fund’s investment objective is to provide investors a high level of current income consistent with the preservation of capital and liquidity. The fund’s investments are in high quality U.S. dollar-denominated short-term debt obligations that include securities issued by the Government and its agencies, taxable municipal securities etc.

PowerShares Capital Management LLC, a leading provider of exchange-traded funds (ETFs) was acquired by AMVESCAP PLC. With this addition AMVESCAP has expanded its ability to offer investment solutions to investors and their advisors
Aim Management Group Inc. is a subsidiary of AMVESCAP PLC, a leading independent global investment manager, dedicated to helping people.
PowerShares entire family consisting of 37 distinctive ETFs is now distributed by AIM Investments. This combination of PowerShares and AIM creates a broad financial suite of products available anywhere and the biggest and most experienced ETF distribution network in the U.S.

As of Oct.31.2006 AIM Investments has approximately $149 billion in assets under management. For more information visit: http://www.aiminvestments.com/portal/site/aim

Tax Benefits of Mutual Funds in USA

In America, there are two ways to invest in Mutual Funds. There are people who give taxes annually depending on their capital gains or the dividend received from the fund. The capital gain taxes are levied on the money received when appreciated assets are sold out. These taxes are ample as compared to gains and largely reduce the performance of Mutual Funds. Secondly, there are people who buy under mutual funds scheme of tax-advantaged retirement plans like IRAs and 401(k)s. These people enjoy tax-benefits on reinvested dividends, capital gains and asset accumulations.

Capital gains occur when the profit in capital asset is cashed. These gains as well as those, which are not realized i.e. the stock prices that have increased but not sold ,are taxed. Even if an investor buys and sells shares a large amount of tax is levied due to distribution of profit from their mutual funds. In case of Mutual Funds an extra point that generate a legal tax responsibility is selling of stocks by Mutual Funds producing tax on unrealized gains for each person investing in Mutual Fund.

Mutual Funds despite their numerous advantages have several tax drawbacks that make incautious investors surprised. Suppose you sell mutual funds without maintaining records of reinvested dividends and capital gain or you wrote off checks on funds – Beware! You might have generated a taxable sale. The tax implication of the funds go much beyond your thought become visible on the Form 1099 introduce by the funds. One pays tax on the dividends and capital gains incurred. So if these are inevitably reinvested and if any part of the investment is sold then appropriate care must be taken on your part to add a proportionate part of the earlier tax to avoid double taxation. Even changing from one fund to a different one i.e. switching under the same banner of funds is not tax-free. Rather it is seen as a sale and reinvestment. However, such swapping within a retirement plan account like IRA, 401(k), Keogh, is not taxable.

Now consider the check writing privilege on a mutual fund account. If you write any check, it’ll be treated as selling of shares and should be reported on Schedule D, Capital Gains and Losses. Also if there is no profit or loss in the transaction, it must be reported. Any lapse would throw off the resolution of aggregate sales price per the return and sales earnings informed on Forms 1099-B, Proceeds From Broker and Barter Exchange Transactions, furnished to the IRS.

However as the taxes on mutual fund grew , the efficiency of this mutually beneficial scheme of low and middle class homes was question marked. The tax laws in America then underwent few changes where investing in mutual funds except that your retirement plan can give tax– saving opportunity. By the new laws implemented in 2002, your savings are not tax–deferred as in Traditional IRA or 401(k) plan but the taxes are reduced considerably.The top tax rate on qualified dividends has been reduced from 35% to 15%.The top tax rate on long–term capital gains has been reduced from 20% to 15%. Certain sectoral-schemes of Mutual Funds in America are exempted from taxes. These are calledTax–exempt bond funds.They generally invest in bonds issued by state and local governments to invest in projects such as hospitals, schools, airports, railways and highway. The dividends paid by these funds are relieved from regular federal income taxes. State–specific tax–free funds offer both federal and state tax advantages. So if you are paying a high tax you can benefit more by putting your money in tax–exempt bond funds.

The money invested in average stock mutual fund has been on an increase but the taxable distributions graph is on rise paving way to higher taxes. The markets are more volatile in America with large caps overtaking small caps. Other markets as real estate and energy stocks have been abrupt. So the fund manager style has changed a lot and they are trading more frequently, thus resulting in higher taxable gains. So if you want to invest in a mutual fund freshly, you must check up its distribution by checking up the portfolio. This is because if you end up paying taxes on capital gains you cannot achieve anything. Go for index funds or tax-managed funds with lesser taxable distributions, if you are looking to save taxes.

Tax Benefits of Mutual Funds in India

Tax is a certainty when you go out to invest in any scheme. But one has to look at various aspects to avoid such taxes. Many people who invest in Mutual Funds look out for Tax-savings. The Government of India revised various Taxation schemes for providing tax-benefits to the investor.

Starting from, April 1, 2003, all dividends distributed to investors by debt-based mutual funds were exempted from taxes. However, Mutual Funds were required to pay a dividend distribution tax of 12.5% including surcharge on the dividends. Under Section 88 of Income Tax Act, 1961 ELSS-equity-linked savings schemes can benefit by a tax-rebate on investment up to Rs 10,000 under certain pre-stated conditions. Depending on whether mutual fund comes under short-term capital asset or a long-term one, the units are liable to taxes. The Section 2(42A) describes mutual fund as short-term capital asset if it is held for less than a year whereas if the units held for more than a year they come under long-term capital asset.

Section 10(38) of the Income Tax Act exempts long-term capital gains, occurring from reallocation of a unit of mutual fund, from taxes. The rule came into being after October 1,2004 so tax is exempted if the transaction took place after this date. This rule requires the securities transaction tax is paid to the appropriate authority.

The Section 111A of the Income Tax Act states that the short-term capital gains that crop up from transfer of a unit of mutual fund is taxable@ 10% plus applicable surcharge. This is applicable to all transactions that take place after October 1, 2004 and also the securities transaction tax is paid.

Under section 88E of Income Tax Act, the security transaction tax can be rebated if the transaction represents a business income.

Capital gains are calculated after considering cost of realization as adjusted by Cost Inflation Index stated by the central government.

The Section 112 of the Act states that capital gains that are not roofed by the exemption under Section 10(38) come under various categories of taxable long-term capital gains and charge rates of tax depending on the category. A resident individual and HUF is charged 20% (plus surcharge). All Indian companies and partnership firms are taxable at 20%( plus surcharge). Whereas the foreign Companies are liable to pay 20% tax (plus no surcharge).

The unit holders are liable to pay taxes. They pay a 10% tax plus applicable surcharge if they don’t opt for the cost inflation index benefit and if they take advantage of the cost inflation index benefit they are charged 20% tax with applicable surcharge.

Under Section 115AB of the Act, 1961, long-term capital gains considered as units acquired in foreign currency by an foreign financial organization kept for a period of more than one year will be taxed@ 10%(no surcharge). The gains don’t take into account cost of acquisition.

Under Section 2(EA) of the Wealth Tax Act, 1957, units held under Mutual Funds are not liable to Wealth tax, as they are not treated as assets. Moreover units of Mutual Fund can be given as gift, thus is not liable to gift tax i.e. no tax is payable by donor or donee.

Under Section 115E of the Act, for a non-resident Indian capital gains chargeable on reallocation or transfer of long-term capital assets are taxable. If they form an Investment income, they are charged @ 20% and long-term capital gains are taxed @ 10%.

Under Section 10(23D), income of any form received by the Mutual Fund is exempt from tax. However the Income distributed to a unit holder of a Mutual Fund is taxable under Section 115R. Income distributed to individual or HUF is taxable @ 12.5% and others are taxed @ 20.0%. This tax is excused for open-ended Equity Oriented Funds.

Purchase Redemption and Repurchase Price

Under various schemes offered by the Mutual Fund, the units of funds are purchased, redeemed, and repurchased. These prices vary according to the type of funds one deals in and the fund’s portfolio must be thoroughly studied before investing in y\the fund.

Purchase Price

Purchase price or sales price is the price paid to buy one unit of the fund. However, the fund can be loaded or it can be a No Load fund. In the former case when fund levies an entry load then the purchase price will be greater than net asset value of the fund. The price will depend upon the entry load levied on the fund. For a ‘No Load’ fund the purchase price is same as NAV. Generally, Funds charge an entry load between 1% and 2%. Exit loads range from 0.25% and 2.00%.
For e.g. Say an investor invests Rs 20,000/- and the current NAV is Rs.20/-. The entry load levied by the Mutual Fund is 1.00%; the price at which the investor invests is Rs.20.20 per unit. Units in a Mutual Fund are allotted to an investor depending upon the amount invested; it is not on thee basis of number of units purchased.
The investor receives 20000/20.20 = 990.099 units.

Now suppose the same investor decides to redeem his 990.099 units. The current NAV is Rs 25/- and the exit load is 1.25%. So the sale or redemption price per unit becomes Rs. 24.9875. The investor therefore gets 99.099 x 24.9875 = Rs.24762.3626.

So the purchase price here is Rs20.20 per unit as the investor has to pay the toll tax for entering the mutual fund bridge. Had it been a NO Load fund the purchase price would have been Rs 20.

Repurchase price

Generally, a Close-ended Fund has a fixed maturity period that range from 2 to 14 years. They sale only a fixed number of shares in the initial public offering after which the shares typically trade on a secondary market. The cost of closed-end fund shares that do business on a secondary market after their initial public offering is totally dependent on the market and doesn’t depend on the initial NAV. It may be more than or less than the share’s net asset value. Repurchase price is the price paid by a close-ended scheme to repurchase its units that are trading in the secondary market. The repurchase price can either be the NAV or it might have an exit load associated with it.

Redemption Price

Redemption price is the price received by the investor/customer on selling units of an open-ended scheme to the fund. In case of funds that does not levy an exit load the redemption price is same as the net asset value. However, in case the fund levies an exit load, the redemption price is lower than the net asset value. In that case the exit load percentage is subtracted from the NAV at the time of redemption of the fund.

Evaluation Criterion while buying a Mutual Fund

There are various aspects that should be looked into before putting your money into the Mutual Funds.

First of all the prospectus or the offer document must be studied in detail before investing. Various aspects covered must include:

Main features of the scheme followed: A Mutual Fund offers various schemes that are categorized according to investment objectives and Maturity period. Open-ended scheme doesn’t have a fixed maturity period and investors can buy or sell shares at any time based on NAV that is declared on daily basis. This scheme offers the highest liquidity. However, a closed-ended scheme has a fixed maturity period of 5-7 years. Based on investment objective, a scheme can be classified as growth scheme, income scheme, or balanced scheme. An investor, depending on his finances, risk-taking capacity, age etc, can take up any of the offered schemes.

Entry or Exit Loads: Some Mutual Funds offer a sales charge or load, which is to be paid when shares are bought or redeemed. There are some funds with no sales charge; these are called No Load Funds. Before investing the funds must be checked for the load they charge. However, it is meaningful to pay a load if fund gives a better investment than No-Load fund.

Risk factors involved in investment: Mutual Funds do not guarantee sure returns. These returns are related to the functioning of these funds. Mutual Funds invest in deposits, shares and debentures. There is some amount of risk associated with investment. The percentage may vary according to the working of the company or different companies may fail to pay the interest or principal amount on their securities. Government might change the rules regarding certain industries thus directly affecting the mutual bonds – this factor must be kept in mind while investing particularly in Sector funds.

Initial issue operating cost: One must check up with the offer document of the mutual fund for initial operating cost

Recurring Expenses that are to be charged: Again before investing all the expenses that are to be paid again and again must be kept in mind.

History of Mutual Funds: The Company’s profile, its profits, portfolio and competence must be the first thing to check up before taking up an issue. Moreover if you are investing in one scheme of he mutual fund the track record of performance in other schemes launched must be checked up.

Type of Securities that the fund invests in: One must see to the bonds, debentures and other stock options that the mutual funds invest in. The market value of these securities must be considered before investing.

Professional qualification of the person handling the funds: The financial handler of mutual funds must be a professional with good experience in the particular field. It is his duty – what to buy, when to buy, keeping a close watch and when to sell off. Handling this collective investment is a major issue and must be given in safe hands.

Penalties, if any, to be imposed: The offer document of Mutual Funds must be read carefully for any kind of penalties imposed under any circumstances.

Benefits of Investing through Mutual Funds

Don’t be under the wrong notion that investment in mutual funds is a complex process and is not your cup of tea. It is rather an investment company that pools your money for the mutual benefits of those who invest in it. The benefits of mutual fund investment include:

Money Management by Professionals: One might have a capability, as an investor to take the right financial decisions but to make sound and effective investment decisions; a qualified and professional approach is a must. If one or more aspect is left out, it can result in failure or loss of investment so analytical guidance of a financial manager is must. Mutual fund is an answer to all the considerations of investment. Mutual funds allow an investor to entrust the investment decisions on the fund manager. It is then his responsibility to decide which securities to buy, when to buy and when to sell. They keep a close watch on the markets and invest and reinvest as and when needed. Their decisions and way to work are a result of experience and research skills in the field.

Low Investment and a good portfolio: A small investor generally takes all the investment decisions by himself. But mutual funds allow these investors to get the benefits of professional advice despite their low investment. Moreover, the portfolio gets richer by having proportionate share in securities one cannot think of buying individually.

Lower Transaction Cost: A mutual fund, on its merit as well as its high volume of its investments, can carry out buying and selling transactions in a more cost effective manner than an individual would do by himself. Moreover the time and effort invested towards the decision-making is also saved considerably.

Diversification: Mutual Funds put their funds in a various securities thus the resultant portfolio is diverse. This diversification reduces risk factor associated with owning a single security. An individual investor can never invest in such a pool of securities but Mutual Funds gives them an opportunity to do so. The Mutual Funds define a proportionate ownership in the complete portfolio of that particular fund. Thus the money gets invested across different categories and various asset classes.

Liquidity: Mutual Funds investment provides investors a simple entry into their investment. Open-ended mutual funds are very liquid; these funds buy back your shares at the prevailing market value on any day. These mutual fund redemptions are applied for via telephone or mail. Generally, the redemption amount is mailed in form of check to the investor on the successive business day following acceptance of the request.

Good Bargaining Capacity: Mutual Fund is a collective medium of investment. The investment of many people is pooled together thus the securities to be bought are bought in volumes. With ample amount of funds, the advantages in terms of bargaining capacity of funds increase.

Tax Benefits: Mutual Funds offer tax Benefits and are ideally suited for investors looking for tax concessions. These funds offer tax rebates to investors under section 88 of the Income Tax Act. Saving in Capital Gains under section 54EA and 54EB are also provided.

Different Schemes under Mutual funds – Tax Savings, Sectoral and Index

Tax Saving Schemes

These schemes give tax rebates to the investors under explicit requirements of the Income Tax Act, 1961 as well as saving in Capital Gains under section 54EA and 54EB, as the Government offers tax incentives for investment in particular avenues. Pension schemes offered by Mutual Funds, equity linked savings schemes are allowed as deduction under Section 88 of the Indian Income Tax Act, 1961. For example investing in diversified equity fund will never give you any tax benefits whereas investing in ELSS will show the tax benefits in the year of investment itself. The amount you invest in one financial year (April 1 to March 31) will be deducted from your taxable income that year. Tax-saving schemes mainly aim towards growth so they basically invest in equities. However, the risks associated with them are similar to any equity scheme.

Index Schemes

Under this scheme the mutual funds also called Index Funds imitate the performance of a specific index. The American index that is most commonly imitated is the S&P 500 by buying all 500 stocks using the same value as the index. BSE Sensex, the NSE S&P CNX 50 in India, NASDAQ 100, Russell 2000, MCSI-EAFE, Wilshire 5000 etc are the other popular stock indexes followed. These funds invest in a set of securities which moves according to a popular index used as a benchmark.and are called passive funds. The index determeines the choice of investments thus leaving the fund manager with no research on securities. However he only needs to adjust the funds i.e. buy and sell shares with change in Index. Thus the passive performance of funds is obvious causing a lower expense as compared to actively managed funds. The net asset value in Index schemes is directly proportional to the index they follow. However due to some factors such as tracking errors the percentage of change varies with each security. This variation is always mentioned in mutual fund document provided.Traditional Index schemes allow the change the share price only once a day. A new type of funds – Exchange-traded funds(ETFs) have a different approach. These index funds sell shares at a price that changes throughout the day, thus increasing the liquidity. Their practical approach have made them a hot cake financial tool with a bright future.

Sectoral Schemes

Sectoral Schemes are the ones that invest solely in particular sectors such as Fast Moving Consumer Goods (FMCG), Metal Industry, Information Technology, Petroleum Stocks, and Pharmaceuticals etc. The profits are dependent on the performance of particular industries. Unlike the equity schemes the portfolio of these schemes is limited to the particular sectors or industries. Therefore the risk factor associated with these schemes is usually high. A close watch on the rise and fall in the values of these securities is a must in order to avoid any unexpected results. Thus the user must exit from the scheme once there is a fear of losses in that particular sector else there is a risk of losing investment.