Know Why Equity Mutual Funds Investing is Better Than Buying Stocks
Zero Capital Gains Tax for Short-Term Profit Booking By the Fund Manager:
When an individual manages a portfolio of stocks, there will most likely be some selling and buying. If the selling of stocks is done within one year of purchase, there is an incidence of short term capital gains tax. Whereas for a fund manager, there is no capital gains tax, even if it were to book short term capital gains for the fund he manages. This will trickle down as benefits for you as an investor in that fund.
Lower Cost Associated With Investing:
The fund, being large will be able to benefit from economies of scale. It can negotiate better with intermediaries, and therefore lead to lower overall costs. For example, if you were to open a share trading account, you’ll probably end up paying 0.5 percent to1 percent of the trade as commission to the brokerage. However, due to the scale mutual funds have, they’ll end up paying much less than that. This benefit will indirectly be passed to you as a mutual fund investor.
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