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Dhaval Kapadia

Articles By Dhaval Kapadia

109 Articles

Your Queries (Mutual Funds): Withdrawal via SWP is redemption; capital gains from MF are taxable

Any withdrawal would lower your portfolio value to the extent of the amount withdrawn, and you may also lose out on any subsequent gains on the withdrawn corpus that would have accrued till the end of your investment horizon.

All mutual funds have facilitated a centralised platform through CVL, NDML, DotEx, CAMS & KARVY to carry out the KYC procedure on their behalf. Once registered with them, you can invest in any mutual fund.

Your queries: Stay invested in market to benefit from power of compounding

The broader market (S&P BSE 500 TR INR) has delivered 124% as of July 16, 2021, while the mid-cap segment (S&P BSE Midcap TR INR) has delivered 141% and the small-cap segment (S&P BSE Smallcap TR INR) has delivered 201% retur

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Your Queries: Mutual Fund – Stay invested in market to benefit from power of compounding

I have been invested in a mid-cap fund through SIP for the past three years. Should I redeem some units as I have got very good returns? —Vivek Kashyap Since the lows of March 2020, equities have rallied sharply on the back

Your Queries: Mutual Fund – Stay invested in market to benefit from power of compounding

YOUR QUERIES: MUTUAL FUNDS: Early redemption stops benefitting from power of compounding

The withdrawals defeat the purpose of investing which is to generate wealth and benefit from the power of compounding.

The PPF allocation is subject to lock-in and you can only withdraw partially before retirement subject to certain withdrawal rules.

Your Queries: Mutual Funds – Choose aggressive or conservative hybrid funds basis your risk appetite

The extent of equity exposure in any hybrid fund depends on the category to which it belongs. Investors can choose from conserv-ative hybrid funds (equity allocation can range from 10-25%) to aggressive hybrid funds (65%-80%)

The PPF allocation is subject to lock-in and you can only withdraw partially before retirement subject to certain withdrawal rules.

Your Queries: Mutual Fund

10-15% of equity allocation should be in mid- and small-cap segment

Over longer horizons, equities tend to outperform most asset classes.

Your Queries: Mutual Funds – Go for flexi-cap fund to increase exposure to mid-cap & small-cap

The bulk of the equity allocation should be into large-cap equities as they are less risky than mid-cap and small-cap equities.

Equities are more volatile than most asset classes with even the possibility of a capital loss over the short-term.

Your Queries (Mutual Funds): Stick to long-term asset allocation plan even if equity holdings are giving good returns

You can consider re-balancing your asset-allocation back to the target weights in case of any signifi-cant drift due to market movement.

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YOUR QUERIES: MUTUAL FUNDS: Go for mix of equity and debt for investing towards long-term goals

While fixed income lends stability to the portfolio, equities play a crucial role in wealth generation over the long run with a potential to deliver superior inflation-adjusted returns compared to fixed income.

You can also allocate 5-10% of your portfolio to gold. Gold offers a hedge against inflation and a safe-haven asset in times of market drawdowns.

Your Queries (Mutual Funds): Continue with your fund if it has outperformed its category peers

Always evaluate a fund in the context of overall portfolio, with respect to the diversification it offers in terms of investment style (growth/value/blend), exposure to different market cap segments (large /mid/small-caps), a

As equity markets are highly volatile, stagger your equity allocation over next 1-4 months to benefit in case of any short-term correction in the markets.

YOUR QUERIES: MUTUAL FUNDS: In volatile markets, look at arbitrage funds with a 3-6 month horizon

Arbitrage schemes are hybrid funds, which take arbitrage positions in equity and related instruments for at least 65% of the portfolio, and park the remaining corpus in mostly high-quality fixed-income instruments and cash &

Remember, widening of the spread differential can lead to arbit-rage funds delivering negative returns for very short periods.

Your Queries – Mutual Funds: You can withdraw money from ELSS after lock-in period and reinvest it

I have been investing in ELSS for the past five years. As the lock-in is for three years, can I withdraw my first year’s investment and reinvest the amount? —K S Singh Yes, since the ELSS investment has completed five

Fund houses don’t deduct any taxes on capital gains except for investments made by NRIs where TDS is applicable.

Your Queries – Mutual Funds: For liquid funds, check expense ratio, yield & credit quality of portfolio

For an investment horizon of three months or more, consider ultra short term funds as well, which with a slightly higher portfolio maturity / duration (3-6 months), offer higher yields.

For an invest-ment horizon of three months or more, consider ultra short term funds as well, which with a slightly higher portfolio maturity / duration (3-6 months), offer higher yields.

Your Queries: Mutual Funds – Is it safe to invest in international equity funds?

You can invest in international equity funds via Indian MF firms

Few of these funds also follow a passive investment strategy, wherein they track a particular global index.

Should I opt for a child plan or invest in a large cap fund for my daughters higher education? – Your Queries

Go for pure-play equity & debt funds to build corpus for kid’s education

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Your Queries – Mutual Funds: Stick to your strategic asset allocation despite market volatility

Investors should ideally stick to their strategic asset-allocation which in turn depends on their risk appetite (ability and willingness to take risk) and not try and time the markets.

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Your Queries – Mutual Funds: Is it advisable to redeem money as returns are going down?

Stick to strategic asset allocation basis risk appetite, time horizon

Since the lows of March 2020, equities have rallied sharply on the back of fiscal and monetary support, and optimism over global economic recovery amid vaccine roll-outs to mitigate the COVID-19 pandemic

Your Queries (Mutual Funds): Shift your corpus from regular to direct plans in a staggered manner

Switching from regular to direct plans is currently treated as a redemption, and hence the proceeds would be subject to tax.

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Your Queries (Mutual Funds): Global funds offer a hedge against currency depreciation

International funds provide an opportunity to diversify your portfolio across geographies giving exposure to varied economic growth drivers.

Thus the investor loses out on any subsequent gains that he would have made on the dividends received till the end of his investment horizon.

Your Queries – Mutual Funds: Go for mix of debt and equity based on risk appetite, investment horizon

Since the lows of March 2020, equities have rallied sharply with benchmark indices almost doubling till date (as of January 12, 2021). The sharp rally has resulted in seemingly stretched valuations, which has toned down futur

The significantly low interest rates too present a probability of subdued future returns in case of fixed-income funds, if interest rates move up.

Your Mutual Funds queries: With markets at new highs, invest via SIP or STP. Keep risk appetite in mind

Higher the investment horizon and risk appetite, higher can be the allocation to equities, which have the potential to deliver positive real returns (more than inflation) over the long term.

In September 2020, SEBI released a circular mandating multi-cap funds to invest a minimum of 25% each in large, mid and small cap stocks.

Growth option of MF does not pay out dividends, hence NAV is higher

After the demise of the primary owner, all units are transferred to the nominee at the NAV prevailing on the day of the death of the primary owner.

Gold ETFs like other securities are traded in the secondary market and investors can buy and sell ETF units in the secondary market at any point in time.

Your Queries: Mutual funds ideal for investors as fund managers do the homework

The realised return (yield) can be computed by plotting the cash flows (SIP amount) against respective dates in an Excel spreadsheet; and using the ‘XIRR’ formula.

Mutual fund investors do not require a demat account and do not have to shell out any other costs other than the expense ratio.

Your Queries—Mutual Funds: Switching from regular to direct plan is considered as redemption

Investors may also opt for the offline route by filling up the switch form and depositing it either at an AMC branch, or branches of registrar & transfer agents (R&Ts).

Want to invest in G-secs? Invest in gilt funds of mutual funds

To gain from a favourable tax treatment, investments in debt mutual funds should be at least over three year holding periods.

For holding periods of over three years, the ‘long-term gains’ are taxed at 20.8% (including cess) post indexation of costs.

Your Queries: Mutual Funds| Compare your debt fund schemes with category peers before switching

The RBI measures announced along with abundant liquidity in the banking system have resulted in yields falling substantially, particularly at the shorter end of the yield curve.

However, for new investors coming in the yields are relatively lower than those prevalent earlier.

Your Queries: Mutual Funds| Equities outperform fixed income in long run; go for SIP to create wealth

If a fund has been delivering below-average performance consistently, you may switch to a more consistent one.

It is advisable to invest via SIP which enables investors to average the cost of his investments.
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