Can I Add a Joint Holder to My Mutual Fund and PMS Without Redeeming?

Sir My question is " I invested in a mutual fund as well as in PMS in signal name. Now my question is can I add another person as a joint holder with out redeeming the fund? If yes what is the procedure? Thanks Kapoor

Ans: Most mutual fund houses / PMS providers do not allow adding a new holder to an existing folio. This is due to the regulations which consider it as a transfer of investment. However, there are exceptions.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

www.holisticinvestment.in

Ans: Your plan to diversify across mutual funds with your husband is commendable. Here’s a breakdown of each fund type and the broader aspects you may want to consider in your investment approach. You’re taking a structured approach by involving a broker, which can help streamline your investments. Let’s evaluate your current choices to ensure they meet your financial goals effectively.

1. Ultra-Short Duration Funds for Liquidity
An ultra-short duration fund is often chosen for its low-risk profile and high liquidity.

Pros: These funds are relatively stable and can offer better returns than traditional savings accounts, which is advantageous for short-term goals or emergency funds.

Cons: Returns may be lower compared to equity-oriented funds, especially over the long term. Additionally, they are subject to market interest rate fluctuations, which could impact returns in certain scenarios.

Recommendation: Ensure this fund aligns with your immediate cash needs or short-term goals. If your intention is a longer-term investment, consider moving part of this allocation to balanced funds for improved growth potential.

2. Equity Savings Funds for Balanced Growth and Stability
Equity savings funds provide a balance of growth potential and stability by blending equity and debt.

Pros: These funds typically suit conservative investors who seek equity exposure with reduced risk. They offer moderate growth potential and stability.

Cons: Returns may be limited if equity markets underperform. Over long durations, the growth might not match that of pure equity funds, given the debt component.

Recommendation: Allocate to equity savings funds if your goal is medium-term growth. For long-term objectives, equity mutual funds with more aggressive growth might be worth exploring.

3. Broadly Diversified Mutual Funds for Long-Term Goals
Investing a significant amount in broadly diversified funds, as seen with your choices in HDFC and Bandhan, can be beneficial for long-term wealth creation.

Pros: Equity funds in diversified categories are designed to provide substantial long-term growth. They are well-suited to help you build a corpus for future goals, such as retirement or wealth accumulation.

Cons: These funds are more volatile in the short term. If markets face downturns, the value of investments might fluctuate. Patience is crucial with these types of funds to realise their potential.

Recommendation: With a horizon of at least 7-10 years, these funds can form a core part of your long-term portfolio. However, regularly review performance with your Certified Financial Planner (CFP) to make sure they align with your financial objectives.

4. Importance of Diversifying Across Fund Houses
You plan to invest an additional Rs 40 lakh through multiple banks. Diversifying across different fund houses (like SBI, Union Bank) can help mitigate fund house-specific risks.

Advantages: Different fund houses may follow unique strategies or approaches. Diversifying allows you to take advantage of various styles and strategies, helping balance performance and reduce risk.

Limitations: Holding too many funds across multiple banks might lead to unnecessary overlap. This could result in redundancy and may dilute returns. Over-diversification can also make it challenging to track performance effectively.

Recommendation: Avoid having too many similar funds within the same asset class. You might want to consult your CFP to identify any overlaps and adjust to maintain a balanced portfolio without excessive redundancy.

5. Active Funds vs. Index Funds
Although your query doesn’t mention index funds, many investors often consider them. However, index funds may not always outperform actively managed funds, particularly in the Indian market.

Limitations of Index Funds: Index funds strictly follow the index, so they might underperform during volatile market phases. In contrast, well-managed actively managed funds have the flexibility to adapt and potentially outperform.

Benefits of Actively Managed Funds: These funds can offer higher returns as professional managers actively adjust the portfolio to align with market conditions and trends.

Recommendation: Actively managed funds, particularly with reputable fund houses, often provide better opportunities for wealth creation. Investing through a qualified mutual fund distributor with CFP credentials can ensure that you have the right actively managed funds aligned with your risk appetite and goals.

6. Importance of Portfolio Review and Rebalancing
Once you’ve made these investments, periodic review is essential.

Why Review is Necessary: Over time, fund performance, market conditions, and your financial goals might change. A regular review helps keep your investments aligned with these dynamics.

Rebalancing Strategy: Aim to rebalance annually to ensure that your portfolio doesn’t become overly skewed towards one type of asset. This can also be an opportunity to shift funds based on changing goals or tax considerations.

Recommendation: Work with your broker and CFP to schedule an annual review. This ensures your investments stay on track and adjustments are made as needed.

7. Tax Implications on Mutual Funds
When investing through mutual funds, tax implications play a significant role in overall returns. Here’s a quick overview to consider:

Equity Fund Taxation: For equity mutual funds, long-term capital gains (LTCG) above Rs 1.25 lakh are taxed at 12.5%. Short-term gains are taxed at 20%.

Debt Fund Taxation: For ultra-short and equity savings funds, LTCG and STCG will be taxed as per your income tax slab. This is essential to plan for and reduce the tax impact.

Recommendation: Keep tax-efficiency in mind, especially if you’re investing substantial amounts. Discuss with your CFP how to plan for capital gains taxes effectively to optimise returns over the long term.

Final Insights
Your structured approach and decision to work with a broker are excellent for goal-based investing. Diversifying across equity and debt funds will help balance growth with stability. Investing additional funds through banks like SBI and Union Bank can be beneficial if monitored carefully to avoid fund overlaps. Actively managed funds will also offer flexibility in fluctuating markets.

By focusing on regular portfolio reviews, optimising for tax efficiency, and ensuring a balanced portfolio across asset classes, you’ll be on a solid path toward your financial goals.

Best Regards,

K. Ramalingam, MBA, CFP
Chief Financial Planner
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment