I have invested in a balanced fund for three years. Now I want to invest in equity diversified fund. Should I redeem my units from balanced funds and invest that as a lump sum in equity funds?
– Nilesh Bahety
Based on your view of the equity markets, you can either redeem all units and invest as a lump sum in equity funds or through a Systematic Transfer Plan (if the equity fund is from the same AMC). If you believe that the markets appear to be a bit overvalued, given their handsome performance in the last one to two years, you could invest through an STP. If the diversified equity fund is from another AMC, then you would need to redeem the units and invest in a liquid fund and start an STP to the desired equity fund.
Is it advisable to invest in equity-linked savings scheme as I cannot claim any tax benefit because my Section 80C deductions are met by home loan repayment?
Equity Linked Savings Schemes (ELSS) invest across large, mid and small cap stocks based on the mandate of the fund and have performed fairly well across timeframes in line with the broad equity market performance and other fund categories. ELSS funds carry a lock-in of three years due to the tax benefits offered. Since your Section 80C deductions are being met by home loan repayment, it would be advisable to consider other categories of open ended equity funds including large caps, diversified equity, small and mid-caps, etc., based on your investment horizon and risk appetite.
Open ended equity funds allow the flexibility of exiting at any point of time (subject to exit loads which are typically applicable for exits within 12-18 months of investment). This flexibility would be important in case the fund underperforms its peers / benchmark indices over 18 to 24 months or if there’s any significant change in investment team (e.g. fund manager) or strategy of the fund.
Can an NRI invest in mutual funds in India?
— Prafull Prasad
NRIs residing in most countries, except for the US and Canada, can invest in mutual funds in India. KYC and income tax norms will vary for NRIs vis-a-vis local residents.
The writer is director, Investment Advisory, Morningstar Investment Adviser (India) Send your queries to fepersonalfinance @expressindia.com