What’s the most important thing that you as an investor look for in any financial product? ROI or Interest rate offered, if I am not wrong. Now, things that affect the final return on a product become crucial. Two things that matter the most in this regard are Fees and Penalties involved in a financial product. Let’s check out the fees and penalties of seven such products in India.
1) Mutual Funds
Mutual funds are becoming popular day by day. This could be either because of the trust that they managed to build in these years or because of uncertainties in other products. Professional management is also a key factor in choosing mutual funds over other financial products. They are believed to be one of the cheapest financial investment products in the market. Flexibility in investment, options in asset classes and many more reasons are fast making them the preferred choice of many investors.
Fees: 1.5-2.5% p.a, depending on the fund
Penalty: Up to 1%, if withdrawn before 6 months or 1 year.
Stock market is always in the news. Whether you invest in it or not, most of you will keep talking about it. Despite of recessions and scams in stock market, faith is not completely lost in stock market. Investors still find value in the markets, especially with economy back on track. Govt. has also been encouraging investments in stock markets by way of tax free returns if held for at least 1 year.
Fees: Up to 0.1% of STT and other Demat Account, transaction charges.
Penalty: Capital gains tax of flat 15% if sold within 1 year.
Insurance has become popular not just as a protection based product but also as an investment product. Investors still find it comfortable in purchasing investment cum insurance products as they are simple to invest. The after effects are being neglected on most occasions.
Fees: 3-5% including mortality costs, administration fees, asset allocation charges and so on.
Penalty: Reversal of tax benefit claimed if redeemed within 5 years, surrender charges.
4) Fixed Deposits
They are the darling of most investors, may be because of the deadly combination of safety and returns offered. Investors have stuck to this product irrespective of interest rate changes that happen frequently.
Penalty: 1-2% on premature withdrawal or breaking an FD. Most of the banks have scrapped it, though.
5) Portfolio Management Services (PMS)
Probably, most risky of all financial products, PMS is an elite investment product. Minimum ticket size for PMS is around Rs. 25 lakh. This is why it has become a niche product. Though some of them have generated good returns in the past, most of the PMS companies have failed miserably.
Fees: 2-3% p.a
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