[xcentrk]

Originally Posted by SmartCat

If you are already getting Rs. 7,000 returns on an investment of Rs. 1 Lakh, that means it is likely you have held the MF close to one year.

Might as well wait to complete one year before selling, so that you can pay just 12.5% tax on gains.

That was just for sake of clarification. I usually hold my MF for as long as I can.

[adimicra]

I have a very basic question..
If I don't have any salary income, only capital gains + dividends etc., what is my slab rate in that case?

[rx100]

Originally Posted by adimicra

I have a very basic question..
If I don't have any salary income, only capital gains + dividends etc., what is my slab rate in that case?

I think after the exemption limit, capital gains would be taxed at special rates of 12.5 and 20% depends on long or short term and dividends be taxed at applicable tax slabs.

[adimicra]

Originally Posted by rx100

I think after the exemption limit, capital gains would be taxed at special rates of 12.5 and 20% depends on long or short term and dividends be taxed at applicable tax slabs.

To be specific, debt funds are supposed to be taxed at slab rate as per the new budget (for both short and long term)
Now, assuming I have only capital gains from debt funds as my income, what will be the income tax rate?

[SmartCat]

Originally Posted by adimicra

Now, assuming I have only capital gains from debt funds as my income, what will be the income tax rate?

Depends on the quantum of capital gains made from sale of debt funds. Since you have no other income, capital gains is the annual taxable income. However, if you are receiving dividends from shares and savings/deposit interest, it needs to be added to your 'annual taxable income'.

Assuming you have none, and your capital gains from sale of debt funds is Rs. 7 lakhs in a year (for example), you have to pay 10% of that amount as tax.



So when pulling out money from debt funds, it makes sense to exit funds with least capital gains.

[rx100]

Originally Posted by adimicra

To be specific, debt funds are supposed to be taxed at slab rate as per the new budget (for both short and long term)
Now, assuming I have only capital gains from debt funds as my income, what will be the income tax rate?

If you login to ePortal, there is a tax estimator tool is available where we can input salary, capital gains etc and find the estimated tax. Please note that it is yet to update with latest budget implementations.

[kap04]

Arbitrage funds have seen inflows of ₹1.08 lakh crore in the last one year, as per data from Franklin Templeton, leading to assets under management (AUM) doubling in 12 months to ₹2.21 lakh crore. Liquid and overnight plans, in the same period, have seen outflows of ₹30,000 crore, until July 31.


https://m.economictimes.com/markets/.../112724928.cms

[mjkaushal]

Hi Gentlemen,

I am a regular investor in stocks for the past couple of years and have built up a substantial corpus over a period of time. Now I have ventured into PMS scheme from Sharekhan in the hope of churning my existing portfolio in terms of realising better returns. ( All the while, I was only investing and not doing any selling ).

Now I have the need of investing a lump sum of money which is earmarked for my son's study which I have to pay during January 2025.

Need suggestions from the members here, so as to which fund I could park my money for the next 4 to 5 months. I'm looking at anything which pays me better than the bank interest rates.

Thanks ,

Mjkaushal.

[vijaykr]

Given the very short term need for the funds and assuming the date of Jan-25 is fixed, I'd just leave it in a 'too big to fail' bank FD only. Liquid funds are an option as well, but unlikely the gains are going to be sufficiently or significantly different to warrant it. This is not something new or what you don't know already.

Just out of curiosity, what are your expectations of gains minus risk in this timeframe of 4-5 months anyway?

[mjkaushal]

Originally Posted by vijaykr

Given the very short term need for the funds and assuming the date of Jan-25 is fixed, I'd just leave it in a 'too big to fail' bank FD only. Liquid funds are an option as well, but unlikely the gains are going to be sufficiently or significantly different to warrant it. This is not something new or what you don't know already.

Just out of curiosity, what are your expectations of gains minus risk in this timeframe of 4-5 months anyway?

Thank you very much for your quick revert.

I had just invested about 1.50 lakhs about 3 weeks back in various schemes like Bandhan innovation fund, HDFC manufacturing fund and Mirae asset Nifty 200 Alpha ETF etc which has already given about INR 7500 in less than a month. Hence assuming that I would be able to make similar if not more returns out of the bigger lumpsum.

I would be probably willing to take the risk and be even happy to get back the invested amount without anygains at the end of the stipulated time.

I would be happy with any rate which would be better than the bank interest rates .

[vijaykr]

Okay, then I guess I'm the wrong person to provide any kind of input here. You're willing to invest in equity for this short duration as well which I would be very uncomfortable with since the goal of higher education and date when amount is needed are fixed.

The market currently continues to generate positive returns for sure, but I wouldn't want to be caught in any short-term downturn given this kind of need which could potentially affect the principal. All this said, it doesn't seem like the up cycle will change in the next few months, and so you might very well be on to a good thing here and make a small pile. Cheers!

[graaja]

Originally Posted by mjkaushal

I would be probably willing to take the risk and be even happy to get back the invested amount without anygains at the end of the stipulated time.

The right question to ask yourself would be if you would be willing to take the risk of losing 10% (in case of mild correction), or even 30% (in case of a market crash) of the invested amount. If the answer is yes, then go ahead and invest in equity. If the answer is no, then go with very short-term funds like overnight funds, or liquid funds.

As vijaykr mentioned, these losses may be unlikely in the current market trend, but nothing is predictable in the stock market. So, you have to be prepared for worst case scenarios.

[SmartCat]

Originally Posted by mjkaushal

I would be happy with any rate which would be better than the bank interest rates .

Without missing a heartbeat, invest the money needed for kid's education in any equity mutual fund. But without telling anybody, invest the same amount in a liquid MF or bank FD too. If you don't have enough money to do both, exit that Sharekhan PMS and use the proceeds.

If the markets move up for 6 months, use funds in equity MF for kid's education. If markets move down, use funds from liquid MF for kid's education.

Heads, you win. Tails, you win!

[tbppjpr]

Originally Posted by SmartCat

invest the same amount in a liquid MF or bank FD too.

If running short of cash in hand then one more strategy is to regularly switch some small amount from the existing equity MFs into the debt funds and keep investing the new cash in the equity MFs when market is down.

For example current market is at all time high, this is the time to make the switches to secure some part of the earned profits from the MFs invested long time back.

After covid era I realized the importance of having little more portion in the debt or FD. I also started diversifying little more in the gold and other type of funds.

[MightyHorse1188]

Originally Posted by mjkaushal

Hi Gentlemen,

I am a regular investor in stocks for the past couple of years and have built up a substantial corpus over a period of time. Now I have ventured into PMS scheme from Sharekhan in the hope of churning my existing portfolio in terms of realising better returns. ( All the while, I was only investing and not doing any selling ).

Now I have the need of investing a lump sum of money which is earmarked for my son's study which I have to pay during January 2025.

Need suggestions from the members here, so as to which fund I could park my money for the next 4 to 5 months. I'm looking at anything which pays me better than the bank interest rates.

Thanks ,

Mjkaushal.

Originally Posted by mjkaushal

Thank you very much for your quick revert.

I had just invested about 1.50 lakhs about 3 weeks back in various schemes like Bandhan innovation fund, HDFC manufacturing fund and Mirae asset Nifty 200 Alpha ETF etc which has already given about INR 7500 in less than a month. Hence assuming that I would be able to make similar if not more returns out of the bigger lumpsum.

I would be probably willing to take the risk and be even happy to get back the invested amount without anygains at the end of the stipulated time.

I would be happy with any rate which would be better than the bank interest rates .

Hey Mjkaushal,

Firstly its great you saw returns of 7500 for an investment of 1.5 lakhs last month,(~5%) i.e roughly 60% if you annualise it. Those kind of returns are generally not sustainable and equity is much more volatile compared to fixed income.Unfortunately there is no wizard in this world who can predict the markets with certainty even if it is only a few months away.


You say you need that money in next 5 months itself, even if we assume the same trend continues for next 5 months (highly unlikely in my opinion for any mutual fund to perform that way given the current market sentiment) you will make about 25% of the corpus as return on your corpus. However you are risking a drawdown of 25-30% of your capital at the same time(equity markets are highly volatile in the short term horizon)! I understand you are ok with not making any returns, but not sure if you're ok going in red.

Just reconsider if that additional risk is necessary if you have already accomplished your goal of arranging the funds required for your son's education?

Parking it in your bank FD or a liquid fund would generally be the prudent advice anyone would give. However since you have a preference for a return above the bank rate, I would tell you to explore arbitrage funds, they are similar to fixed income funds but more tax efficient if you fall in a higher tax bracket. I assume you are in the highest tax bracket, since you mentioned you are able to invest in a PMS(which are generally products for HNIs with minimum ticket size of 50 lacs - 1crore).

So Arbitrage funds are treated like any other equity mutual funds, LTCG at 12.5% and STCG at 20%.They generally give the similar return as any liquid fund but the post tax return is superior if you belong to the higher tax bracket because you are not taxed at slab rates like the other debt funds.

You exercise your own due diligence and proper research. This is just a suggestion and not an advice.

Wish your son the very best for his higher education.

Cheers!

Originally Posted by SmartCat

Without missing a heartbeat, invest the money needed for kid's education in any equity mutual fund. But without telling anybody, invest the same amount in a liquid MF or bank FD too. If you don't have enough money to do both, exit that Sharekhan PMS and use the proceeds.

If the markets move up for 6 months, use funds in equity MF for kid's education. If markets move down, use funds from liquid MF for kid's education.

Heads, you win. Tails, you win!

Originally Posted by tbppjpr

If running short of cash in hand then one more strategy is to regularly switch some small amount from the existing equity MFs into the debt funds and keep investing the new cash in the equity MFs when market is down.

For example current market is at all time high, this is the time to make the switches to secure some part of the earned profits from the MFs invested long time back.

After covid era I realized the importance of having little more portion in the debt or FD. I also started diversifying little more in the gold and other type of funds.

Smartcat and tbppjpr, it's a very creative plan that has been derived. However there is no free lunch in life, unfortunately

Both the ideas in effect mean an attempt to balance risk with additional transactions/churn in the portfolio without meeting the required goal. The best analogy I can think of here is, imagine you are betting on the winning team in a cricket match but you have bet on both teams here.

Without going into the more complex issues here fundamentally you are only committing higher capital and investing in both fixed income and equity.However your returns get diluted or averaged out, so you didn't really hedge any risk here and create any additional return.The other way of phrasing your idea is to protect the corpus for higher education in an FD/similar, and get additional funds to invest in equity.In my opinion that is valid and something one would do anyhow if they had surplus funds which they don't intend to use in the near future.

Also the latter idea of tbppjpr, was basically to set up an SWP in existing equity mutual funds and enter into debt funds and bring the proposed new funds into equity funds. The net effect is you are investing into debt funds and having additional transaction costs and capital gains for exiting from existing MF positions and entering into same!

So to summarise, unfortunately at this point we have not been able to engineer a risk free arbitrage opportunity here. I would suggest MJkaushal or anyone else in the similar situation to just be clear about their risk appetite and invest in a suitable product. In general one would take the risk in equities if you have a fairly long horizon, because it is almost certain you will get rewarded for your risk and patience in that case. For everything else a lower return but safer investment vehicle always makes sense, if you value liquidity(Getting the same amount back with almost certainty) .

Cheers!