THINKING TO EXIT MUTUAL FUND INVESTMENT?

Are you scared of investing in mutual funds? There are times when even the more experienced investors are confused about their investments. For several investors, afterthoughts creep in, especially when the investment decision is made so quickly.

Also, there are situations one blames on their not deciding to exit an investment just after the stock markets witness a steep fall. There are many ups and falls in one’s investment journey, there are bonds when we need to worry and sometimes even consider leaving the fund scheme.

Let look at some of the situations when we doubt and need solutions for the same.

The change of fund manager:

The Indian Mutual fund industry is still in search of good fund managers, but some are still in top positions. Investors, who have invested by the advice of fund manager instead of the fund attributes are likely to be in trouble when a fund manager exists the AMC.

Those investors think to exist the investment in the fund scheme managed with the exit of the fund manager.

What to do?

The AMCs run their mutual fund following rules and principles that mitigate any change in the way the scheme invests in case of a change in the fund management.

Therefore, fund management is the team task, you need to continue observing the scheme performance before taking any decision.

Check scheme underperformance

The performance of the mutual fund schemes changes every passing day. There are times when the scheme in which you have invested gives you lower returns and then some of the other which could be the reason for worry.

What to do?

The mutual fund schemes underperformance could the reason for many factors There are times when a scheme returns take a hit, owing to economic changes or due to specific bets not working out. You need to find out the reasons for the dip in the performance, and if it is consistently lower than the benchmark and peers for more than 3-4 quarters, in this situation you could consider existing to a better performing scheme.

The Economic and Political Condition

Your investment value is dipped to 30 percent and the stock market is going in loss. You are worried about the investment will go down as the capital amount you have invested and consider existing as a good option.

What to do?

There are many situations that are unpredictable and not only change the landscape of the financial market but also of the economy. For example, the recent Covid-19 case is unprecedented and impacts all segments of the economy. Therefore, figure out the causes behind the performance loss of the Mutual fund scheme you have invested in, there are good possibilities of your investments, not just regaining but also getting higher returns when things turn around.

Change in financial status

There could be a situation in your life, where you think before investments, you may have need of money for urgent bases for some work and don’t have the option to invest in a fund scheme and you consider an exit.

What to do?

If you have a cash flow issue, you could opt for other options like consider the SIP pause feature. Similarly, on the other hand, if you have more money to invest, instead of exiting the current investment fund scheme, you can increase your investments in the same.

Change in fund’s fundamental Attributes

The change of fund scheme you have invested or the merging of the fund scheme due to change objective could also cause doubts about investing in such a scheme.

What to do?

This problem is solved since the 2017 SEBI circular on categorization and rationalization of Mutal Fund Schemes. To abide by this new rule, several mutual fund schemes were merged and the objective of many investments was changed to fail in line with the new regulation. These came into action by mid-2018. If you did not act then, you might just view your investments before making any move.

Changes in Tax Law

The rule of long-term capital profit of 10% on gains from equity mutual fund investments of over Rs 1 lakh in a financial year in 2016, did change the way of investment in equity mutual funds. Also, the introduction of dividends being taxed in the hands of the taxpayer in budget 2020, will make you change the investment strategies you were following.

What to do?

Consider if your investments are in the dividend option, you could consider moving to the growth option for tax efficiency. Instead of the dividend income, you could structure an SWP to create an income stream from your investment in the growth option of the equity scheme.

 The change of exit load

Consider that there is an increase in the exit load of the mutual fund scheme in which you have invested.

What to do?

Investment in mutual funds comes with exit load, which is stated in the time of investing but could change later on. Mostly the exit load is based on hurdle rates, which taper down over time, you could stay invested till the next load is nil.

The sale and/or AMC Merger

The merging of the AMC in which you have invested or sold out to other AMC.

What to do?

There are many reasons for the merging of AMC, you must evaluate the performance of the new merged scheme before reacting to the existing investment. It is rare that the objective of the merged scheme would be different from the one you had initially invested in. If the performance of the merged scheme continues to be good, you can still stay with your investment.

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The Share Market: A Guide to Trading – Gill Broking

It is, therefore, important to learn both the pros and cons of intraday trading to get a better idea of how this market works and how exactly you can grow your money. In this post, we will walk you through a few advantages and disadvantages of intraday trading. So, keep reading to learn more.

• Beware of fixed/guaranteed/regular returns/ capital protection schemes. Brokers or their authorized persons or any of their associates are not authorized to offer fixed/guaranteed/regular returns/ capital protection on your investment or authorized to enter into any loan agreement with you to pay interest on the funds offered by you. Please note that in case of default of a member claim for funds or securities given to the broker under any arrangement/ agreement of indicative return will not be accepted by the relevant Committee of the Exchange as per the approved norms.
• Ensure that pay-out of funds/securities is received in your account within 1 working day from the date of pay-out.
• Be careful while executing the PoA (Power of Attorney) – specify all the rights that the stock broker can exercise and timeframe for which PoA is valid. It may be noted that PoA is not a mandatory requirement as per SEBI / Exchanges.
• Register for online applications viz Speed-e and Easiest provided by Depositories for online delivery of securities as an alternative to PoA.

• Do not keep funds idle with the Stock Broker. Please note that your stock broker has to return the credit balance lying with them, within three working days in case you have not done any transaction within last 30 calendar days. Please note that in case of default of a Member, claim for funds and securities, without any transaction on the exchange will not be accepted by the relevant Committee of the Exchange as per the approved norms.

• Check the frequency of accounts settlement opted for. If you have opted for running account, please ensure that your broker settles your account and, in any case, not later than once in 90 days (or 30 days if you have opted for 30 days settlement). In case of declaration of trading member as defaulter, the claims of clients against such defaulter member would be subject to norms for eligibility of claims for compensation from IPF to the clients of the defaulter member. These norms are available on Exchange website at following link: NSE, MCX

• Brokers are not permitted to accept transfer of securities as margin. Securities offered as margin/ collateral MUST remain in the account of the client and can be pledged to the broker only by way of ‘margin pledge’, created in the Depository system. Clients are not permitted to place any securities with the broker or associate of the broker or authorized person of the broker for any reason. Broker can take securities belonging to clients only for settlement of securities sold by the client.

• Always keep your contact details viz. Mobile number/Email ID updated with the stock broker. Email and mobile number is mandatory and you must provide the same to your broker for updation in Exchange records. You must immediately take up the matter with Stock Broker/Exchange if you are not receiving the messages from Exchange/Depositories regularly.

• Don’t ignore any emails/SMSs received from the Exchange for trades done by you. Verify the same with the Contract notes/Statement of accounts received from your broker and report discrepancy, if any, to your broker in writing immediately and if the Stock Broker does not respond, please take this up with the Exchange/Depositories forthwith.

• Check messages sent by Exchanges on a weekly basis regarding funds and securities balances reported by the trading member, compare it with the weekly statement of account sent by broker and immediately raise a concern to the exchange if you notice a discrepancy.

• Please do not transfer funds, for the purposes of trading to anyone, including an authorized person or an associate of the broker, other than a SEBI registered Stock broker.

• Do not deal with unregistered intermediaries (who are not registered with SEBI/Exchanges).

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