Want to invest or withdraw? This may help you

By: |
December 10, 2019 2:05 AM

For portfolio construction, asset allocation-based approach should be followed.

SWP, SIP, Foreign Asset, Indian investor, SEBI, Global Equity Mutual Funds, LTCG, debt funds Investments in equity funds can be made through the Systematic Transfer Plan (or STP) mode over 12 to 18 months, to take advantage of market volatility and benefit from rupee cost averaging.

Use SWP to withdraw funds periodically

 I have been investing via SIP for more than 10 years. Can I withdraw some units periodically?
– Chayan Ghosh

Yes, you can withdraw your invest-ments periodically unless they are under the lock-in period. You can withdraw via the SWP (systematic withdrawal plan) route by redeeming a fixed amount at a given frequency. You may also withdraw a lumpsum amount via a redemption request as and when required. Funds usually have minimum withdrawal amounts specified in their disclosure documents. Be sure that the units being withdrawn are not under the exit load period.

Should a resident Indian investor declare his holding in SEBI registered Global Equity Mutual Funds as a ‘Foreign Asset’ in ITR?
—Ashish Kumar

, units of global mutual funds domiciled in India are not required to be disclosed as ‘Foreign Asset’ in ITR.

I want to invest Rs 10 lakh in debt, liquid and arbitrage mutual funds. The period for which I want to remain invested is five to six years. How should I do it?
—SR Murthy

For portfolio construction, asset allocation-based approach should be followed. Given your time horizon of five to six years and assuming no intermittent liquidity needs, you can consider investing about 40% of your corpus into equity (35% large caps and 5% mid-caps) and the rest (60%) into debt funds with a high credit quality portfolio.

Investments in equity funds can be made through the Systematic Transfer Plan (or STP) mode over 12 to 18 months, to take advantage of market volatility and benefit from rupee cost averaging. An allocation of 5 to 10% to liquid funds can be maintained subject to other short term liquidity requirements.

Over holding periods (HP) up to three years, arbitrage funds are attractive owing to their favourable tax treatment compared with debt fund investors in the highest tax bracket who are taxed at 30%. (Arbitrage funds taxation: STCG – 15% for HP<1 year, LTCG – 10% for gains exceeding Rs 1 lakh for HP>1 year.)

Over longer holding periods (more than thre years), debt funds tend to outperform arbitrage funds, which combined with a lower effective tax rate post the indexation of costs leads to debt funds being able to outperform arbitrage funds on a post-tax basis. Hence, you may be better off investing the non-equity corpus entirely into debt funds.

The writer is director, Investment Advisory, Morningstar Investment Adviser (India). Send your queries to
fepersonalfinance@expressindia.com

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