The Mutual Fund Show: Do Target Maturity Schemes Give Better Tax Benefit Than Hybrid?
If the investment time frame is low, then it might not give as much returns, according to experts.
Mutual funds can help to generate wealth over a longer span and they can also be a tax-friendly medium for investment. But with multiple options, including target maturity and hybrid funds, investors face a dilemma on which scheme to invest in.
"It totally depends on the client's overall allocation basket," Kshitiz Mahajan, managing partner and chief executive officer of Complete Circle Wealth Solutions LLP, told NDTV Profit. "If they have some liquidity, they should in my sense ... look for G-Sec fund at these levels as it makes much more sense viz-a-viz hybrid equity fund for the fixed income allocation."
Target maturity funds are a "different ball game" if one wants to play on interest rates, according to Juzer Gabajiwala, director, Ventura Securities Ltd. However, it involves calling on interest rates, which is not a preference for most investors, he said.
Comparing hybrid and target maturity funds is like comparing apples and oranges, Gabajiwala said. Depending on what is the component of equity, a person can merge equity and debt to put it into hybrid, he said.
While there are a lot of options available, if one opts for a conservative balance fund or dynamic asset allocation fund for a span of three years, "the taxation impact is hardly anything", Gabajiwala said.
Both agreed that ,if the investment time frame is low, then it might not give as much returns. They consider three years as a good time to be invested in a fund to get higher returns.
With the rally in the real estate sector, Gabajiwala suggested that those interested in the sector invest in infrastructure theme-based funds, as there are no realty funds in the market. This is a better play than pure real estate as it also includes other sectors like cement, he said.
"I think one can take a sectoral call, but then in sectoral call, you need to come at a bottom of a cycle and you need to exit at the top of a cycle, which never happens. So, it becomes a little difficult for all the investors," said Mahajan.
However, if one is interested, they can invest in funds that have majority exposure to realty stocks, he said.
