I am 32 and planning to invest Rs 4,000 every month in mutual funds (MFs) through a systematic investment plan (SIP) for seven to 10 years. However, I have read that the tax implications for MF investments are going to change drastically once the new Direct Taxes Code comes into effect from next year. It will make investments in MFs taxable at redemption, making these investments less attractive. Guide me in taking an appropriate decision.
I presume that you plan to invest in equity MFs. While these investments can become less attractive after the implementation of the direct tax code, you will still be eligible for paying long-term capital gains tax at a lower rate than normal income. In comparison, most alternative investments that you may choose will also be subject to tax. Moreover, returns from equities as an asset class have normally been more than returns from other asset classes in the long run.
I am interested in investing in debt funds. Please tell me which fund house will be a better and safer option among Birla Sun Life, Franklin Templeton and HDFC. Also, as the amount is large, should I opt for a lump sum investment or an SIP?
While I would not like to comment on individual fund houses, you should ideally choose a fund with a proven track record. You should also look at the fund portfolio to see the quality and duration of the debt papers the fund is holding. You may opt for an SIP or a lump sum investment depending on availability of funds.
I am 53 and have recently started an independent venture. I need your advice for a suitable investment plan to get regular monthly income? I will receive the following amount soon: Rs 10 lakh towards gratuity, leave and so on, and Rs 17 lakh in superannuation account of ICICI Prudential Life Insurance. I need advise on my Public Provident Fund (Rs 25 lakh), a third of which I wish to either commute or convert into a monthly pension. I have no loan obligations and reside in my own house.
Since you are seeking a regular income and are middle-aged, you should opt for safe investments that can give you a steady income with low capital volatility. You could commute your fund into a monthly pension. Apart from this, you could invest in bank fixed deposits and post office monthly income scheme. You could also look at MF monthly income plans. These are predominantly debt funds, with 15-20 per cent in equities, which could provide some capital growth, albeit with some volatility.
The writer is director, Touchstone Wealth. Send your queries at yourmoney@bsmail.in
