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Selling mutual fund holdings within a year of buying attracts capital gain tax.
What happens if I switch my holdings from a growth plan to a dividend plan under the same mutual fund within a year of buying?
Do I still have to pay tax?
- Vikas Aggarwal
Switching the units from growth to dividend plan or vice versa under the same scheme will amount to redemption (sale of units) and fresh purchase (buying of units).
Therefore, it would attract short-term capital gains tax of 10%, if switched within a year of investing.
I'm 25 and planning to start investing in funds. I'm looking at a long-term investment and comfortable with medium risk.
The following are the funds I've chosen based on their five-year returns:
HDFC Equity
HDFC Prudence
Reliance Growth
Reliance Vision
Sundaram Select Midcap
I'm planning an SIP of Rs 1,000 in each of these. What do you suggest?
- Deepak Ravichandran
You have chosen some of the best available funds for your portfolio.
HDFC Equity and Reliance Vision are quite versatile and they spread their portfolio across large- and mid-cap stocks. Both of them are suitable to form the core of an investment portfolio.
Reliance Growth and Sundaram Select Midcap, on the other hand, are mid-cap focused funds and can add that extra punch to the returns.
HDFC Prudence is a balanced fund which invests in equities as well as debt instruments, and therefore is relatively safer than an all-equity fund.
All of these funds boast of a sterling performance record. Four of these enjoy a five-star rating while one is a four-star rated fund. These are ratings given by our firm, Value Research, which is a mutual fund research outfit. The stars (one to five) indicate the performance and risk involved. Five being the best ranking and one being the worst.
As per your present portfolio (the funds which you have selected) the investments will be well-spread out across stocks and sectors as well. In short, your portfolio should do well over the long-term.
It is good that you are investing via a Systematic Investment Plan. Just keep investing regularly and do not panic because of the sharp fall in the market. Patient investors are likely to succeed over the long-term.
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