AI Drafter - (New and Powerful) 
Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter. 
TaxTMI 
TaxTMI 
Comparison of investing in Mutual Funds and Share-trading
X X X X Extracts X X X X
X X X X Extracts X X X X
....omparison of investing in Mutual Funds and Share-trading<br> Query (Issue) Started By: - Jignesh Desai Dated:- 29-11-2020 Last Reply Date:- 1-12-2020 Other Topics<br>Got 1 Reply<br>Indian Laws<br>Comparison of Mutual Fund Returns versus Share-trading Returns :- To earn returns from Equity , an individual has the choice of investing in Mutual Funds or trading in shares & earning profit (Of course ,....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... apart from many other choices also , like PMS , Smallcase ,etc) . In the case of investing in Mutual Funds , he has many choices . For example depending on what type of Mutual Fund he thinks is most correct for the current scenario , he can invest in that type of Fund . For e.g. , if he wants to take less risk & volatility , he can select a Large Cap Fund . If he thinks it is right time to get i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nto Mid Caps , he can select a Mid Cap Fund , If he thinks the time is correct for Value-based investing , he can select a Value-oriented strategy Fund . If he still wants lesser volatility , he can select an Equity & Debt Fund (Balanced Fund) , If he wants to diversify amongst different types of assets , he can go for a multi-asset Fund . If he likes tactical allocation , he can select a Dynamic ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Asset Allocation Fund , If he wants to save on the expenses , he can pick an ETF or Index Fund . Since past few years there are also funds that invest in Chinese Equities , USA Equities , etc . Also , in a Mutual Fund , his money is being managed by the Fund manager , who is an expert in his field . When he invests in a Mutual Fund , he would be charged a certain percentage as the expense ratio ,....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... which would be anywhere between 0.05% to 2.25% depending on what type of fund he has selected & whether he has invested in the regular option or direct option . However , as far as taxation is concerned , he can rest assured that for Long Term Gains (if he held the units for more than a year before redemption) from Equity Mutual Funds , he would be taxed at 10 % & for short-term gains (if he rede....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ems within a year) , at 15 % . Now , if , instead of investing the same money in Mutual Funds , he trades with this money in shares . Let's consider the pros & cons . If he decides to trade through a full-fledged broker (Many people feel uncomfortable trading through "discount brokers" ) the brokerage + taxes that he has to pay on each delivery -based trade is approximately 0.7 % of....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the value of the trade . So , just 2 purchases & 1 Sale of the whole amount of money would equal the whole year's charges in case of the most expensive Equity Mutual Funds (0.70% * 3 = 2.10 % is almost equal to the 2.25 % charged by the most expensive regular mutual funds) . Apart from this , there is also a slim risk , that in case his turnover exceeds a certain amount , or if he trades very....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... frequently , the income tax authorities may deem all the profits that he earns from share-trading as business income . And then he would be charged at the marginal slab rate that he falls into (which could be anywhere between 0 to 30% ) . In case if he is falling in the 30 % bracket , he would be taxed at 30 % instead of 15% (Short Term Capital Gain rate for Equity) . Plus , in case of share - tr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ading , he would have to give time to the share terminal between 9.15 am to 3.30 p.m. everyday from Monday to Friday . So , considering that in Mutual Funds , he does not have to devote 6.15 hours every day , from Monday to Friday , & just periodic monitoring of the performance of his investments would be enough , net of ALL EXPENSES IN BOTH THE CASES , how much extra POST-TAX returns from the sh....
X X X X Extracts X X X X
X X X X Extracts X X X X
....are-trading should he earn , on an annual basis , to justify the extra time investment he has to make in case of share-trading as opposed to investing in Mutual Funds ? Reply By Ganeshan Kalyani: The Reply: Sir, any specific query?<br> Discussion Forum - Knowledge Sharing ....