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Home » Personal Finance » How mutual fund folio can become your new saving account

Have you ever seen the campaign “Mutual fund Sahi hai”?

This campaign was run to spread more awareness and break the myth associated with investing in mutual funds. In this article, we will see that how mutual fund folios will take place of your saving account in the near future. And believe me, After reading this article, you will see toward mutual fund investment from a different angle. So let’s start with some interesting facts,

Banking and Investment sector in India

Banking is one of the oldest industry in India and Bank of Hindustan became the first bank which was established in 1770. Currently, State bank of India is the largest bank with 24000 branches and 59000+ ATM. Whereas, Mutual Fund investment is a relatively newer concept in India debuted in the year 1963 with the foundation of Unit Trust of India act 1963. 

Saving account 

bank account

You must be familiar with the saving account. It’s easy to open. We trust it more because we have seen our parents or grandparents to have money in savings accounts. 

There was a time when having a saving account was considered a privilege. Banks were used to giving interest rate 3-4 % and the account has to open in presence of bank official.

Now things have been changed. There are many private banks who are offering 6-7 % interest in savings accounts based on minimum balance eligibility( Can be 75k to 1Lakh). Account opening became a lot easier as well. You can open a saving account online independently in midnight as well. Government is also running many schemes such as Jan-Dhan Yojna to bring everyone into the banking system. 

Mutual funds

mutual fund

Mutual funds are kind of new tool where more people started looking at to build a corpus or for a safer investment alternative of direct stoke trade. Mutual funds are fully managed by fund managers so you don’t need to spend time or worry much about your money.

Mutual funds are flexible as your saving account. You can take out the money whenever you want and the returns offered by mutual funds can potentially beat any good instrument (though it can tank and eat into the principal amount as well) and can offer you assured returns depending on the category of mutual fund you choose. Promotion of mutual funds in media is helping to spread awareness about this.

As per the reports released by the Reserve Bank of India, the aggregate savings deposit of scheduled commercial banks, as of March 2018 is estimated to be approximately at Rs. 38 trillion. As per AMFI reports, as of March 2018, the mutual funds AUM is estimated to approximately Rs. 23 trillion. The strides taken by the mutual fund industry are impressive indeed.

The need for saving account or mutual account

Basically Saving account is meant for “savings” you do. You can have a saving account for multiple purposes i.e to park your excess funds and earning some interest  on it, to remit money to a friend or a service provider for service availed of an item purchased, to pay bills, or to cash out when needed. 

A mutual fund can do the same things for you. It comes in different shape and size according to everyone’s need. You can choose one fund (folio) or many funds based on your risk appetite and financial goal.

Imagine a situation where your salary is credited to the one folio you decide, the restaurant transactions are paid off through another folio which you have earmarked for expenses, your rental expense goes through a third folio which you have made for that purpose. We would need to offer a remittance and bill payment license to the Asset Management Companies (AMCs) to do so.

Benefits of the Mutual fund over saving account

Mutual Fund can offer higher returns over saving account to beat the inflation based on fund performance you have chosen. There is more flexibility in opening an account than saving account. You can start with a little amount (i.e 500 per month). If you have done the KYC with one AMC or folio, you need not undertake KYC each time you invest in another fond. KYC details will be fetched automatically based on your PAN. Saving account needs the separate KYC each time.

Well, Everyone is getting more awareness about mutual funds now a days. We will be writing more articles on explaining the common questions about saving account or mutual funds. Please subscribe and follow us and stay updated.


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