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Should I Stay Invested In Quant Mutual Funds Despite Poor Performance?

Janak

Janak Patel  |7 Answers  |Ask -

MF, PF Expert - Answered on Oct 18, 2024

Janak Patel is a certified financial planner accredited by the Financial Planning Standards Board, India.
He is the CEO and founder of InfiniumWealth, a firm that specialises in designing goal-specific financial plans tailored to help clients achieve their life goals.
Janak holds an MBA degree in finance from the Welingkar Institute of Management Development and Research, Mumbai, and has over 15 years of experience in the field of personal finance. ... more
Asked by Anonymous - Oct 11, 2024Hindi
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Respected Sir, I did invest in Quant Mutual Fund lumpsum in Large & Mid Cap , Flexi cap and Infra. I did invest on 7-8 June 2024. But These funds are performing very poorly since then as compared to their peers. May I request you to please guide me if I shall stay invested for long period or redeem?

Ans: Same query replied to Neeraj, please refer the same.
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
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Ramalingam

Ramalingam Kalirajan  |6689 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Apr 30, 2024

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sir, pl. advise me whether to continue or wait with this fund. I have invested in these funds sip / lumpsum. Aditya Birla Sun Life Small Cap Fund (formerly known as Aditya Birla sun Life Small & Midcap fund) Lumpsum Aditya Birla sun Life frontline equity fund Lumpsum Aidtya Birla sun life liquid fund Lumpsum Aditya Birla sun life tax relief '96 SIP stopped ICICI Prudential Equity & Debt Fund ‐ Growth Lumpsum Hdfc Balanced advantage fund-Direct Plan-Growth Option Lumpsum ICICI prudential value discovery fund_direct plan- Growth earlier known as ICICI prudential value fund series 19 direct plan subsequently switch out (merger) on 24.06.2021 Lumpsum Nippon India Focused Equity Fund ‐Growth Plan Lumpsum Nippon India Large Cap Fund‐ Growth Plan ‐Growth Option Lumpsum Axis Small Cap Fund ‐ Regular Plan ‐ Growth SIP Canara Robeco Emerging Equities ‐ Regular Plan Growth SIP HDFC Multi Cap Fund ‐ Growth Option SIP ICICI Prudential Flexicap Fund ‐ Growth SIP ICICI Prudential Transportation And Logistics Fund SIP SBI Magnum Midcap Fund - Regular Plan - Growth SIP
Ans: When deciding whether to continue or wait with your current mutual fund investments, consider the following factors:

Performance: Evaluate the performance of each fund over different time periods. Look at their returns compared to benchmark indices and peer funds in the same category.
Fund Objectives: Ensure that the objectives of the funds align with your investment goals and risk tolerance. Review the fund's investment strategy and portfolio composition.
Fund Manager: Assess the track record and expertise of the fund manager managing each fund. A skilled and experienced fund manager can significantly impact fund performance.
Expense Ratio: Consider the expense ratio of each fund, as higher expenses can eat into your returns over time. Compare the expense ratios of your funds with similar funds in the market.
Market Conditions: Take into account the current market conditions and economic outlook. Certain funds may perform better in specific market environments.
Changes in Personal Financial Situation: Evaluate any changes in your personal financial situation or investment goals that may necessitate adjustments to your portfolio.
Review Periodically: Regularly review your portfolio to ensure it remains aligned with your objectives. Consider rebalancing or making changes if needed based on market trends or changes in your financial situation.
By carefully considering these factors and possibly seeking advice from a financial advisor, you can make informed decisions about whether to continue or wait with your current mutual fund investments.

..Read more

Ramalingam

Ramalingam Kalirajan  |6689 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jun 06, 2024

Asked by Anonymous - Jun 06, 2024Hindi
Money
I am having following mutual funds: 1. Quant active - ? 6000 2. PGIM flexi cap -?5000 3.Quant small cap - ?9000 4. Moti lal oswal midcap -?5000 5. Invesco large and mid cap ?4000 6.HDFC large and mid cap ? 5000 Please advise whether I should continue with these funds. Investing since 1/2018
Ans: Evaluating your mutual fund portfolio is essential to ensure it aligns with your financial goals and risk tolerance. Given your current investments and the duration since 2018, let's assess whether you should continue with these funds.

Portfolio Overview
Your mutual fund portfolio consists of:

Quant Active Fund: Rs 6,000
PGIM Flexi Cap Fund: Rs 5,000
Quant Small Cap Fund: Rs 9,000
Motilal Oswal Midcap Fund: Rs 5,000
Invesco Large and Mid Cap Fund: Rs 4,000
HDFC Large and Mid Cap Fund: Rs 5,000
Diversification Analysis
Flexi Cap Funds
Flexi cap funds, like PGIM Flexi Cap Fund, invest across large, mid, and small-cap stocks. They provide flexibility and balance risk with potential high returns. These funds adapt to market conditions, making them a stable choice for your portfolio.

Large and Mid Cap Funds
Invesco and HDFC Large and Mid Cap Funds focus on large and mid-cap stocks. These funds offer a mix of stability and growth potential. Large-cap stocks provide stability, while mid-caps offer growth opportunities.

Mid Cap Fund
The Motilal Oswal Midcap Fund targets mid-sized companies. Mid caps can offer significant growth but are riskier than large caps. This fund adds growth potential to your portfolio.

Small Cap Funds
Quant Small Cap Fund focuses on small-sized companies. Small caps can provide high returns but come with high volatility. Your allocation of Rs 9,000 here indicates a higher risk tolerance for potentially higher rewards.

Active Fund
Quant Active Fund invests actively in various stocks based on the fund manager's strategy. Active funds aim to outperform the market, providing opportunities for higher returns but also involve higher management costs.

Assessing Portfolio Performance
Historical Performance
Evaluate the historical performance of each fund. Compare their returns with benchmark indices and peer funds. Consistently performing funds are more likely to continue delivering good returns. However, past performance is not a guarantee of future results.

Fund Manager Expertise
The experience and track record of fund managers are crucial. Funds managed by experienced managers with a proven track record are more likely to perform well. Check the consistency and strategy of your fund managers.

Expense Ratios
Expense ratios impact your returns. Lower expense ratios mean higher returns for investors. Compare the expense ratios of your funds with industry standards. High expense ratios can erode your returns over time.

Risk Assessment
Market Risk
Equity investments are subject to market risk. Your portfolio has a mix of large, mid, and small-cap funds, which diversifies this risk. However, your high allocation in small caps increases exposure to market volatility.

Sector and Stock Concentration
Check if any funds have high exposure to specific sectors or stocks. Diversification across sectors reduces risk. Ensure no single sector or stock dominates your portfolio.

Liquidity Risk
Certain funds, especially small cap and mid cap funds, can have liquidity issues. Ensure a part of your portfolio remains in highly liquid funds to manage unforeseen needs.

Alignment with Financial Goals
Investment Horizon
You have been investing since 2018, indicating a medium-term horizon. Equities are suitable for long-term investments due to their potential for higher returns. Ensure your investment horizon aligns with your financial goals, such as retirement or children's education.

Risk Tolerance
Your portfolio indicates a higher risk tolerance, especially with significant allocation in small and mid-cap funds. Assess if this risk level matches your financial goals and comfort. If you prefer stability, consider increasing allocation in large-cap funds.

Strategic Adjustments
Rebalancing
Rebalance your portfolio periodically to maintain desired asset allocation. Over time, some funds may outperform, skewing your allocation. Rebalancing ensures your portfolio remains aligned with your risk tolerance and goals.

Adding New Funds
Consider adding new funds to enhance diversification. Explore funds in other categories like balanced funds, international funds, or sector-specific funds. This can capture opportunities in different market segments and reduce risk.

Reviewing Fund Performance
Regularly review the performance of your funds. If a fund consistently underperforms, consider replacing it with a better-performing fund. Stay updated with market trends and adjust your strategy accordingly.

Tax Efficiency
Tax Benefits
Equity investments enjoy favorable tax treatment. Long-term capital gains (LTCG) from equity funds are taxed at a lower rate compared to other asset classes. Consider the tax implications of your investments.

Tax-saving Instruments
If you are investing in tax-saving mutual funds (ELSS), you get additional tax benefits under Section 80C. This reduces your taxable income and enhances post-tax returns. Consider these options if they align with your goals.

Seeking Professional Advice
Certified Financial Planner
A Certified Financial Planner (CFP) can provide personalized advice based on your financial situation, goals, and risk tolerance. Professional guidance ensures your investment strategy remains robust and aligned with your objectives.

Summary of Recommendations
Continue with diversified funds: Your portfolio has a good mix of flexi cap, large, mid, and small-cap funds, providing balanced risk and growth potential.
Rebalance periodically: Adjust your portfolio to maintain desired asset allocation and manage risk.
Add new funds: Enhance diversification with balanced, international, or sector-specific funds.
Review performance: Regularly monitor your funds and replace underperforming ones.
Consult a CFP: Get personalized advice for tailored investment strategies.
By maintaining a strategic approach, rebalancing your portfolio, and seeking professional advice when needed, you can achieve your financial goals and secure a prosperous future.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Janak

Janak Patel  |7 Answers  |Ask -

MF, PF Expert - Answered on Oct 17, 2024

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Respected Sir, I did invest in Quant Mutual Fund lumpsum in Large & Mid Cap , Flexi cap and Infra. I did invest on 7-8 June 2024. But These funds are performing very poorly since then as compared to their peers. May I request you to please guide me if I shall stay invested for long period or reddem?
Ans: Hi Neeraj,

Mutual Funds are a good option for investment. The investment horizon/timeline is very important when you consider equity mutual funds, they need to be invested for the long period (7+ years).

You have only recently started in June 2024, so keeping patience with your investment is important. You can track the progress of your investment but don't get influenced by day to day fluctuation in its NAV. Decisions should be taken based on many factors but do consider 1-2 years duration to see if fund performance is steady, improving or below par compared to your expectation and its peers and the market.

Now coming to the funds you have provided - Quant Large and Midcap and Quant Flexicap are good funds and I think you should be patient. Note - both are actively managed funds and you can expected to see fluctuations in the short term. Stay invested in these 2 funds as they are well diversified and long term prospects look good.
Quant Infrastructure fund is a Sectoral fund and the fluctuations will be high. If your risk profile is very high, then you can continue. There will be a period of time when the sector loses favor in the market and thus the returns will be impacted and during good times it will provide good returns.
Alternately if you decide to exit then include a fund from another fund house which is well diversified and aligns to your risk profile. Some good options to consider - an Index fund based on Nifty 500 (passive) or a multicap fund (active) - to get a a well diversified exposure to Large-Mid-Small cap.
Note- Redemption at this time may attract exit load apart from tax implications for short term.

Regards
Janak Patel
Certified Financial Planner.

..Read more

Latest Questions
Janak

Janak Patel  |7 Answers  |Ask -

MF, PF Expert - Answered on Oct 18, 2024

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Please advice on my portfolio. I'm 50 years old married freelancer with no children so end up doing investments through STP's. Right now I have 1 crore in ICICI Agressive Hybrid, 1 crore in HDFC Balanced Advantage, 50 lakh PMS with ICICI Contra, 50 Lakh PMS with Abbakus. 30 Lakhs HDFC Mid Cap. 30 Lakhs Oswal Business Cycle. Apart from that I have 20 lakhs in PPF. Please advice
Ans: Hi Saket,

Your portfolio is a mix of investments across MFs, PMS and PPF.
Assuming PMS is all equity, the asset allocation reflects approximately an 80:20 ratio in Equity:Debt respectively, which seems fine.
As your objectives or goals are not available, it would be difficult to indicate if they suit your profile.

Most of the MF schemes mentioned are fine with a good track record. The exception is the Business Cycle scheme - this is a new scheme and being sectoral it will attract very high risk, its approximately 10% of your portfolio value so continue if you understand the risk.
Alternately you can consider a Flexi-cap or Multi-cap MF scheme that are well diversified and for a 7+ years of time horizon.

PMS services - if your experience with the PMS services are good and they meet your expectations for returns, then do continue.

PPF - plan to utilize it as a tax efficient instrument to withdraw funds at the time of retirement. Continue to contribute max possible and complete lock-in period of 15 years and keep extending the account with contributions. Over the next 10-15 years you can accumulate a good corpus which will be completely tax free for withdrawal.

An observation/suggestion as its not indicated - As you are freelancer, suggest emergency funds - please plan to have at least 6-9 months expenses in an investment which has high liquidity and safety e.g. FDs. In extreme eventualities like the pandemic or a personal crisis, this fund can support the immediate needs.

As you are going to be moving towards your retirement in a decade or so, I recommend you contact a Certified Financial Planner who can add value to your portfolio and provide a personalized evaluation and guidance taking into consideration your family profile, goals and requirement of the future while assessing risk and tax efficiency.

Regards
Janak Patel
Certified Financial Planner.

...Read more

Janak

Janak Patel  |7 Answers  |Ask -

MF, PF Expert - Answered on Oct 18, 2024

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I bought an apartment in Delhi in the year 2002 for 5 lacs (own funds) Plus 15 lacs bank loan for 15 years at interest rate of 10%. Now want to sell it for199 lacs. Please advise on following 1. How to work out cost of acquisition considering interest paid on bank loan and expenses incurred from time to time to upkeep the flat around 5 lacs. I don't have bank interest certificate. 2. What will be capital gains tax calculation if I sell it now with both options old v/s new. Please advise. Raghav.
Ans: Hi Neeta / Raghav,

At the high level the below should help you.

1. Cost of acquisition can include the purchase price and the cost of improvement, so the upkeep expenses to maintain the property cannot be consider, but if you made any form of addition/alterations to the property then you can include it.
The interest paid on loan is eligible for tax benefits, it cannot be included in the cost of acquisition.

2. Old Rule - using the CII for calculations indicate Capital gains of Rs130 lacs, the capital gains tax (20% on difference after indexation) works out to be approximately Rs26 lacs. Note exact dates of purchase/sale will determine the CII values to be used, assumed FY2002-3 and FY2024-25 for now.
New Rule (2024 budget) - Capital gains = difference of sale and cost price i.e. Rs179 lacs, tax of 12.5% on it is approximately Rs22 lacs.

Note - you can add/reduce the cost/sale price with expense incurred in transacting the property e.g. brokerage.

Options to save tax on the Capital gains amount
1. Reinvest in another residential property within 1 year prior and 2 years after sale date or construct within 3 years after sale date.
2. Invest in NHAI bonds - has lock-in period and the interest earned is taxable.

Please contact a CFP or a Tax consultant for further guidance.

Regards
Janak Patel
Certified Financial Planner.

...Read more

Ramalingam

Ramalingam Kalirajan  |6689 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Oct 18, 2024

Money
Please review my MF Portfolio Sir....Bandhan Small Cap Fund - 11000, Parag Parikh Flexi Cap Fund -15500, Kotak emerging equity Fund - 7000, Tata digital Fund - 7000, Motilal Oswal Midcap Fund - 12000, HDFC Balanced Advantage Fund - 12500, With setp up of 10% every year. is this portfolio Good ?? should I change something ?? Also, I want to start another 5000 SIP, which fund should I go for ?. My age is 28 yrs My goal is wealth creation, i can invest for long term. As of now I don't have any urgency
Ans: I’m glad to see you’ve taken active steps towards wealth creation. At 28, with a long-term investment horizon and no immediate need for liquidity, you’re well-positioned to build substantial wealth through disciplined investments.

Let’s evaluate your portfolio and offer insights for further improvements, including recommendations for your new SIP.

Assessing Your Current Portfolio
Your portfolio reflects a diverse range of funds, which is essential for reducing risks and optimizing growth. Here's a detailed evaluation of each component:

1. Bandhan Small Cap Fund – Rs 11,000
Small-cap funds have high growth potential but are also highly volatile. It’s great for wealth creation over the long term, but ensure you're prepared for volatility in the short term.

You’ve allocated 16% of your current SIP to small caps. That’s reasonable given your age and long investment horizon.

2. Parag Parikh Flexi Cap Fund – Rs 15,500
This is a flexi-cap fund, which means it can invest in large, mid, and small caps based on market conditions. These funds offer a good balance of risk and reward.

With about 22% of your SIP allocated here, it adds diversification to your portfolio. This fund provides the flexibility to adjust to market conditions, which can be a key strength.

3. Kotak Emerging Equity Fund – Rs 7,000
Mid-cap funds like this have the potential to offer high returns with moderate risk. Mid-caps often strike a balance between the stability of large caps and the growth potential of small caps.

Your allocation of 10% to mid-cap is fine for your long-term goal, as these funds can generate wealth if held for 7-10 years.

4. Tata Digital Fund – Rs 7,000
A sectoral fund like this focuses on the digital or technology sector, which can be lucrative. However, such funds tend to be highly volatile and depend on the sector's performance.

While sectoral funds can provide high returns, their risks are high due to concentrated exposure. It's a good idea to limit your exposure here, and you’ve done well by keeping it at around 10%.

5. Motilal Oswal Midcap Fund – Rs 12,000
Another mid-cap fund in your portfolio, this allocation increases your exposure to mid-caps. While mid-caps have good growth potential, too much concentration in this category can amplify risk.

You’ve allocated 17% to mid-caps overall, which is slightly on the higher side. You may want to reduce this exposure slightly to balance your risk.

6. HDFC Balanced Advantage Fund – Rs 12,500
Balanced Advantage Funds (BAFs) dynamically manage the portfolio between equity and debt. This ensures lower volatility while giving reasonable returns.

Having 18% of your portfolio in a BAF adds stability and cushions against market fluctuations. This is an excellent choice for long-term wealth creation with moderate risk.

Diversification and Risk Management
Your portfolio is diversified across different types of equity funds—small-cap, mid-cap, flexi-cap, and sectoral funds. However, there’s a concentration of mid-cap and small-cap exposure, which could increase risk during market downturns. Since you are aiming for long-term wealth creation, I recommend a more balanced allocation.

Steps to Improve Diversification:

Reduce Sectoral Exposure: The Tata Digital Fund's high concentration in one sector can increase risk. You may want to limit sectoral funds to 5-7% of your overall portfolio.

Balance Mid-Cap Exposure: You’ve invested in two mid-cap funds. Consider reducing one to moderate your overall risk exposure.

Adding Another SIP of Rs 5,000
You mentioned starting a new Rs 5,000 SIP. Given your long-term horizon and focus on wealth creation, here’s what I suggest for further diversification:

1. Large-Cap Fund
Adding a large-cap fund will bring more stability to your portfolio. Large-cap funds tend to be less volatile and provide consistent returns, especially during market downturns.

This can act as a safety net, balancing the volatility of your small and mid-cap funds.

2. Hybrid or Dynamic Allocation Fund
If you're looking for more stability, you might consider adding a balanced or hybrid fund to your portfolio. These funds invest in both equity and debt instruments, which can stabilize your portfolio during market fluctuations.

A hybrid fund would complement your existing BAF and reduce overall portfolio risk.

3. International Equity Fund
You can also consider diversifying internationally by adding an international equity fund. These funds provide exposure to global markets and help diversify country-specific risks.

This can help balance the portfolio if Indian markets face periods of stagnation.

Disadvantages of Index and Direct Funds
Since you've opted for actively managed funds, I want to reinforce that you're on the right track. Index funds, although lower in cost, are passive and do not have the potential for outperformance in dynamic markets. In contrast, actively managed funds offer better opportunities as professional fund managers constantly analyze the market to maximize returns.

Also, it's wise to invest through a Certified Financial Planner (CFP) who can guide you based on your financial goals and risk profile. While direct funds may save on expense ratios, they often lack personalized advice, which can cost you in the long term.

Final Insights
Your current portfolio has a solid foundation for long-term wealth creation, with a strong emphasis on small and mid-cap funds for growth. However, it would benefit from some adjustments to balance risk and improve diversification.

Consider reducing your sectoral and mid-cap exposure slightly to manage volatility.

Adding a large-cap or hybrid fund to your new SIP will provide more stability.

Investing for the long term with periodic reviews will ensure you stay aligned with your goals.

Stay disciplined with your investments, increase your SIPs regularly as planned, and avoid frequent changes. With a long-term vision and the right fund selection, your portfolio can grow significantly over time.

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

...Read more

Ramalingam

Ramalingam Kalirajan  |6689 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Oct 18, 2024

Asked by Anonymous - Oct 18, 2024Hindi
Money
Hlo sir, im vijaylaxmi 24 yrs old i want to do sip please suggest which fund is best to invest
Ans: Vijaylaxmi, it’s great that you want to start investing at the young age of 24.

Starting early gives you the benefit of time.

Your investment horizon is likely to be long, which is ideal for SIP investments.

Before selecting any fund, it's important to understand your financial goals.

You need to assess your risk tolerance, investment horizon, and financial objectives.

Since you are young, you can afford to take some risk, but that should align with your comfort level.

If you want to build wealth over the long term, equity mutual funds would suit your needs.

They have the potential to offer higher returns in the long run compared to other asset classes.

However, you should stay invested for at least 5-7 years to ride out market fluctuations.

Diversification Across Funds

It’s crucial to diversify your investments across different fund categories.

Diversification will reduce risk by spreading your money across different sectors and asset classes.

You can consider investing in large-cap funds, multi-cap funds, and mid-cap funds for diversification.

Each type of fund comes with its own level of risk and potential return.

Large-cap funds are more stable, while mid-cap and multi-cap funds can offer higher returns but come with higher volatility.

Why Not Index Funds?

You might hear people suggesting index funds, but let’s evaluate them.

Index funds simply track a market index like Nifty 50 or Sensex.

They don’t have active fund management, which means there’s no expert to make decisions during market ups and downs.

Although they have lower costs, their returns may not always outperform actively managed funds.

With actively managed funds, a professional fund manager selects stocks, making adjustments to take advantage of market opportunities.

The Benefits of SIP in Actively Managed Funds

SIP or Systematic Investment Plan is an excellent way to invest in mutual funds.

It helps you invest a fixed amount regularly, regardless of market conditions.

This instills financial discipline and reduces the impact of market volatility through rupee cost averaging.

You won’t need to worry about timing the market; SIP takes care of that for you.

Actively managed funds have the potential to outperform the market, especially when you stay invested over the long term.

When you invest through SIP in an actively managed fund, you get the expertise of a fund manager making strategic decisions to maximize returns.

Regular Funds Over Direct Funds

Now, let’s talk about the mode of investment.

Direct funds may seem attractive because they have lower expense ratios, but investing through regular funds offers benefits.

Regular funds give you access to the guidance of a Certified Financial Planner (CFP) or Mutual Fund Distributor (MFD).

Their advice can help you make informed decisions about your portfolio, especially if market conditions change.

A regular plan allows you to get ongoing support for your investment journey.

Investing through a Certified Financial Planner can help you align your portfolio with your financial goals.

They bring a deeper understanding of markets and can help optimize your asset allocation over time.

Flexibility in Fund Choices

While selecting funds, ensure that you pick flexible options.

Some funds are rigid and only invest in a certain category of stocks, which can limit their performance during different market cycles.

Flexible funds, like multi-cap funds, allow the fund manager to shift between large-cap, mid-cap, and small-cap stocks based on market conditions.

This flexibility can increase the fund’s chances of delivering consistent returns over time.

Equity Fund for Long-Term Goals

If your goal is long-term wealth creation, equity mutual funds are your best bet.

They generally outperform debt funds, FDs, and other conservative instruments over time.

Equity funds can offer better inflation-adjusted returns.

These funds invest in the stock market, which is why their potential for growth is higher.

However, they come with short-term volatility.

So, it’s important to have patience and a long-term perspective when investing in equity funds.

Growth or Dividend Option?

When investing in mutual funds, you will have to choose between the growth and dividend options.

Since you are young and likely looking to accumulate wealth, the growth option is more suited for you.

The growth option allows your investment to compound over time, as any profits earned by the fund are reinvested into the fund.

The dividend option provides periodic payouts, which is more suitable for investors seeking regular income.

In your case, you may not need regular income right now, so the growth option will help you build a larger corpus in the long run.

Taxation on Mutual Funds

When investing in mutual funds, it’s important to understand the tax implications.

For equity mutual funds, long-term capital gains (LTCG) are taxed at 12.5% after Rs 1.25 lakh.

Short-term capital gains (STCG) are taxed at 20%.

This means if you sell your equity mutual fund units before three years, the gains will be taxed as STCG.

If you hold the fund for longer than three years, any gains above Rs 1.25 lakh will be taxed as LTCG.

Since your investment horizon is long-term, this will work in your favor as you can take advantage of the LTCG benefit.

Systematic Withdrawal Plan (SWP) for Future Income

In the future, when you achieve your financial goals, you can convert your SIP investments into a Systematic Withdrawal Plan (SWP).

An SWP allows you to withdraw a fixed amount of money from your investment at regular intervals.

This is an effective way to create a steady stream of income from your mutual fund investment.

It can be particularly useful for retirement planning.

Since you are young, you have plenty of time to grow your investments before you need to rely on SWP.

Final Insights

At the age of 24, starting an SIP is a brilliant move.

Your time horizon allows you to take on equity market risks, which can result in higher long-term returns.

Diversify your investments across different fund categories to balance risk and return.

Actively managed funds offer better prospects than index funds due to the expertise of fund managers.

Choosing the growth option will help you accumulate wealth faster, as your profits will be reinvested.

Remember to stay invested for at least 5-7 years to maximize your returns.

As you move forward, work with a Certified Financial Planner to review your portfolio and make adjustments when necessary.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

https://www.youtube.com/@HolisticInvestment

...Read more

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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