You can look to stagger a smaller sized portion of the equity corpus more than the next handful of months.
I have invested for 8-10 years in standard mutual fund schemes. I now want to shift to direct program. Should I move the cash accumulated in standard plans? Will it imply lengthy-term capital gains tax? —Gaurav Batra Switching from standard to direct plans is at present treated as a redemption, and therefore the proceeds would be topic to tax. However, the reinvestment would also reset the price of the funds to the prevailing net asset worth (NAV) at re-getting into the fund, and therefore the capital gains at the finish of your investment horizon would accordingly be decrease, major to a decrease tax outgo at the finish of your investment horizon. The only loss you could face is loss due to exit loads (if any), stamp duty charge on entry (.005%), and subsequent gains which you could have produced on the tax outgo till the finish of your investment horizon.
The further expense levied in case on standard plans is charged to the all round investment corpus and therefore the influence more than lengthy investment horizons would be sizeable. Hence, moving to direct plans undoubtedly tends to make sense. Considering the reality that you have been investing for 8-10 years, the bulk of your investments beneath standard plans are most likely to be topic to the more favourable lengthy-term capital gains taxation. Hence, you might begin with moving this bulk of the standard program allocation to direct plans, and subsequently invest the remainder of the corpus more than the next year.
Given the prevailing wealthy equity market place valuations, you can look to stagger the equity portion of your investments more than the next handful of months. However, this can topic you to the threat of underexposure if markets rally additional. As the accumulated corpus till date might be substantial, it is advisable to stick close to your lengthy-term strategic asset allocation and allocate a bulk of the equity corpus suitable at the outset. You can look to stagger a smaller sized portion of the equity corpus more than the next handful of months.
Switching amongst possibilities inside the exact same scheme is just a modify in accounting, and therefore there would be no break in your exposure. You need to evaluate the overall performance of the funds in your portfolio vis-à-vis that of their respective category peers. If a fund has been delivering under-typical overall performance regularly more than the final two-3 years, you might switch to a more constant one.
The writer is director, Investment Advisory, Morningstar Investment Adviser (India). Send your queries to