BFC Capital’s 266th Quality Circle Program: Inspiring Investment Excellence

BFC Capital successfully conducted its 266th Quality Circle Program on October 19, 2024, at ACC Limited (Adani Cement) in Amethi. The event featured an engaging session by AVP Sagun Balram, who delivered a captivating presentation on the art of investing. Attendees gained invaluable insights into smart investment strategies, wealth creation, and financial planning. The program reinforced BFC Capital’s dedication to educating and empowering individuals with the knowledge needed for a secure financial future.

Why should I invest in mutual funds instead of fixed deposits?

Compared to fixed deposits (FDs), mutual funds may yield higher returns. They are more appropriate for long-term, goal-based investing, nevertheless, and they include market risks.

Even if they are safer, FDs can’t keep up with inflation over time. Let’s use an example to better grasp this:

Assume that on March 18, 2025, Mr. A invests ₹1,00,000 in an SBI FD that offers 6.8% p.a.

Earned interest: ₹6,800

If Mr. A is in the 30% tax bracket, his interest tax would be ₹2,040.

Return after taxes: ₹6,800 minus ₹2,040 = ₹4,760

Percentage of net return: 4.76%

Taking inflation into account, the CPI inflation rate is at 3.61%.

4.76% – 3.61% = 1.15% is the real return.

Now, considering inflation:

The current CPI inflation rate is 3.61%

Real return = 4.76% – 3.61% = 1.15%

This means that after accounting for taxes and inflation, the actual return is only 1.15%, which barely grows your wealth over time.

Mutual funds, on the other hand, offer inflation-beating returns over the long term. While they do carry market risks, a well-planned investment strategy can help manage them effectively.

Are mutual funds safe for someone with an unstable income?

Establishing an emergency fund that can cover at least six months expenses is the first step if your income is unstable. This guarantees financial stability in the event of unforeseen financial troubles.

Mutual funds might be an excellent investment choice after you have an emergency fund. They provide liquidity, so you can take money out when you need it.

Are mutual fund returns taxable?

Indeed, capital gains tax may be applied on mutual fund returns, dependent on the fund form and investment duration.

Gains over ₹1.25 lakh are subject to 12.5% tax on equity mutual funds (LTCG for more than a year). The tax rate is 20% if the money is STCG and removed within a year. Debt Mutual Funds are taxed as per your income tax slab rate, making them less tax-efficient.

What should I do if my mutual fund investments are in loss?

Mutual funds fluctuate because they are linked to market movements. A short-term dip doesn’t mean a permanent loss. If your investment is in the red, don’t panic—instead, take these steps:

Hold on: Market downturns are temporary; over time, markets tend to recover and grow.

Consult a financial expert: At BFC Capital, our wealth managers can guide you based on market trends and your portfolio.

Track your investments: Use the Prodigy Pro App to monitor your portfolio and get expert reviews.

Let’s look at an example:

Here is an example of what happens if you stop investing due to the 2020 pandemic. Let’s say Mr. A started the SIP on 1/1/18. Unfortunately, 2 years later, there was a pandemic and the global economy started collapsing. Seeing the negative returns, Mr. A panicked and stopped his SIP. Now, the money invested has become a lump sum. After 1 year, the market saw an increase and thus, on 1/04/2021, Mr. A earned approximately 11% as profit.

However, if Mr. A had continued the SIP, there could be an additional gain of approximately 5%.

By April 2021, the market recovered, and his investment grew by 11%. However, had he continued his SIP, he could have gained an additional 5%.

This proves that staying invested is key to long-term wealth creation. Mutual funds are a long-term game—the more patient you are, the better the returns you can expect.

You need to be patient and wait for market corrections to create wealth.

For a better understanding of the market and the investment landscape, please consult a financial expert.