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It is good that you are thinking beyond fixed deposits to invest your money. While being a safer investment,FDs may not offer better returns when factoring in inflation. Mutual funds are good options for your requirement. You can start an SIP in equity mutual funds. Equity mutual funds invest their money in equities and you can expect an average return of 12-18 per cent over long term say 5 to 15 years. You can also invest a part in balanced fund which invest a part in equity and a part in debt. There will be lower risk but the returns are also low. Balanced funds,typically,provide a return of 8-15 per cent. I would suggest you divide your investment money in the following ratio; 20 per cent in equity,50 per cent in balance fund,and 30 per cent in a gold fund.

I am investing Rs 5,000 per month in mutual fund SIPs. When I have surplus money,I top up my SIPs. Are there any extra charges /tax levied at the time of top up? When I will withdraw the money from the SIPs after 10 years,will TDS or other charges be levied? 

Sanjeev Kumar

Taxation in mutual fund schemes is a little complex. On equity funds that invest a major part more than 65 per cent in equities the short-term capital gains tax is 15 per cent. If you bought units and sold them before a year,this tax is applicable. The long-term capital gains tax is zero,which means you will not be taxed if you sell after a year. In non-equity schemes investing less than 65 per cent in equity the short-term capital gains tax is your income tax rate. The long-term capital gains tax is 10 per cent without indexation or 20 per cent with indexation. Indexation is essentially factoring inflation in your tax calculation. This reduces the tax liabilities. As far as SIP is concerned,each purchase is taken separately. The tax calculation is based on FIFO first in first out. So suppose,you are using SIP and bought mutual funds on January 15,2013. You bought the second set a month later. In both cases,you were able to buy 100 and 91 units of mutual funds at Rs 100 and Rs 110. If you sell all of them on January 20,the first 100 units sold will not warrant any tax because you sold after a year but the remaining 91 units will be taxed at the rate of 15 per cent.

Expert advice by Adhil Shetty,CEO,BankBazaar.com

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