Team-BHP (https://www.team-bhp.com/forum/)

-   Shifting gears (https://www.team-bhp.com/forum/shifting-gears/)

-   -   The Mutual Funds Thread (https://www.team-bhp.com/forum/shifting-gears/105873-mutual-funds-thread-343.html)

https://www.business-standard.com/ma...3101424_1.html

It is now a commonly recognized axiom that insurance and investments should not be mixed, however, our top regulatory watchdog thinks otherwise.

So were we wrong all along?

The insurance component of ULIP currently is a money back policy. The end result is that premiums are large and life cover is small. However, the current proposal is to mix mutual funds with term insurance. So here, the life cover will be large and cost of insurance will be low.

How many people from the hinterland would really be making the distinction between a mutual fund investment (done mainly to join the current bandwagon of high market returns) and a term insurance life plan which is a sunk cost with zero return on survival is a question mark in my opinion?

The insurance industry as a whole needs to agressively push pure term plans and get more people insured across the spectrum. But then there's not much money in this.

Only the other day I was reading about ULIPs which allow investment into index funds :unhappy

https://economictimes.indiatimes.com...4.cms?from=mdr

To the horror of distributors and industry, finally someone debunked the carefully cultivated perception of blind SIPs. Lot of people became uncomfortable particularly because AMFI has spent crores to condition and convince the salried class to keep the money flowing by telling stories that would add to the confirmation bias and make them sign the ECS for SIP. Naren runs largest value fund of size exceeding 50k cr. Obvoiusly he couldn't overlook the deviation in the PE of midcap and smallcap index from the log term median. He made a simple point that if you choose the wrong product to put your money in, the risk will be all yours, not of the distributors or the AMC.

Some times the cliches they keep repeating on social media and TV about Mutual Funds is nauseating. No surprises that his speech was pulled out. Some one like him needs to have compliance approval due to the obvious business interests. This shows how we should question every advice being dished out in the media and apply our own logic than believing what others want to make us believe.

A question to the learned:

What is the different in investing in US Equities through Mirae Asset NYSE FANG+ ETF versus Investing in same Indvidual equities (AAPL, GOOG, etc.) through INDMoney?

I'm not very learned but can take a shot.

1. ETF will suffer from the difference in NAV vs traded price due to RBI cap on the AMCs forex transfer. So you may end up paying a premium.
2. This ETF and other FoFs sold before March 31, 2025 even if sold after 1 year holding will be taxed at slab. Post 1 April, it may be an LTCG treatment (so check with your CA).
3. ETF reduces the risk of investments in individual equities.
4. It does not suffer from the TCS cap that you'd face when investing directly into US market via indmoney / similar broker since in latter case you are remitting forex outward directly.
5. The individual equity route, you are remitting directly so TCS free cap is 10 Lac (post the current budget) - but you can remit.
6. Foreign equity earnings are taxed at slab rate irrespective of holding period from what I recall when you repatriate the earnings back here (again, check with your CA)

Hope this helps.

One major issue -

1. Investments through brokerages like INDMoney, IBKR, Charles Schwab, etc - are considered as investments in US by non residents and through funds resident in US. In other words they are subject to US Federal Estate tax. This is 40% of entire asset value (not cap gains) that crosses $60000. So in case of inheritance over $60000 in value will be taxed at 40% by USA.

2. But for MF investments through India based funds, the US federal estate tax does not apply.

The biggest difference will be that of investing into a mutual fund as opposed to picking individual stocks like Apple, Google etc, that I suppose is obvious though.

The other thing is, the Mirae ETF will be subject to the SEBI imposed limits that such funds are subject to which invest in American stocks. I think all MF of such nature have already exhausted that limit and are probably no longer accepting fresh purchases.

Somebody who invests in this fund can elaborate.

Kudos to Naren S for going against the prevailing herd mentality and also his own company/industry. Someone needed to say it and I am glad that a person of his stature did it.

Now that I have a little more time after my 'early retirement' last year, I have started taking more active calls on my MF portfolio. (Direct equity calls are still far away, or perhaps never).

Some of the changes in my portfolio in the last 3 months:

1. Started SIP in Franklin Templeton US Opportunities Feeder fund - To get exposure to US stocks after Trump win.

2. Got out of Quant funds (Momentum fund, and Aggressive Hybrid fund) - This was both because of year-end cleanup and recent bad performance. Feeling lucky here :).

3. Stopped SIP in 4 funds after this Naren S speech - 2 Midcap funds (HDFC Midcap opportunities and ICICI Midcap Index fund), 1 Momentum fund (ICICI Momentum Index fund), and 1 Infra fund (DSP Tiger; starting an SIP here was a mistake :)). Haven't taken out the money yet but will do it from the Momentum fund and the infra fund based on tax implications.

4. Started SIP in 1 Multicap fund (Franklin Templeton Multicap).

5. I am planning to continue/enhance all other STPs (2 Large Cap Index funds, 1 Flexi cap fund (PPFAS), Multicap fund (FT), 2 Hybrid funds, 1 Multi asset fund).

The above is not investment advice. My goals/risk profile are not same as yours. Please use your own judgement.

Kudos to Naren Sir for having the guts to say what is true and calling a spade a spade. I have been following him for a long time and have great respect for him. One thing I have realized is it always a warning sign when there is a mass frenzy for something. Blind SIPs have made many undeserving people millionaires and bloated the value of many crappy companies.

Don't know about inheritance but i checked and found that:
1. Only dividend income is taxed in the US at 25%. Due to Double Taxation Treaty with India, one can offset 25% tax as per one's tax rate.
2. LTGC and STGC are not taxed in the US at all. So one has to pay tax only in India on the returns.

Here is the link from US IRS about US Federal Estate tax on inheritance for foreigners https://www.irs.gov/businesses/small...-united-states

Here is a list of countries that have tax treaties for US Federal Estate tax. India is not on this list https://www.irs.gov/businesses/small...-international

Just a curious question on continuing SIPs with Midcap funds at this time. It is true that Midcap funds are over-valued and going through corrections and might not see an upside in near future. So, isn't it a good time now to keep investing some portion of the portfolio in a good Midcap fund through SIPs? I am talking about people who can remain invested for next 7 years at least. I can understand the caution for people who are investing only in midcap and small caps, but is it a concern to keep investing some portion of the monthly investments for people with a good asset allocation? Just curious to know.

This precisely, while the midcap market is in turmoil right now, over a long a period of time (say 10+ years), it is likely to give good returns. But then again, predicting a funds performance for the next 10 years and sticking to it when you see alot of turmoil in the short term isn't an easy call to make.

Yes, if you have long term goals (10+ years) it makes sense not to bother about this noise and keep your SIPs in Midcap and Small cap active.

My goal, post early retirement, is to keep my corpus and my standard of living intact :). While I can still take some risks with my corpus, I am not very comfortable to put in fresh money into Small or Midcap space. I made a small yet significant mistake in my earlier post - All are STPs from Liquid/Arbitrage funds, not SIPs. When I am getting an assured 6-7% return from Liquid funds, why to put money into something where I know it is overvalued?