1. Units of all old funds, belonging to Regular or Direct option, bought till 31st Jan'18, will always qualify for the grandfathering protection clause towards long-term capital gains whenever redeemed.
2. You should redeem your 1-yr+ old Regular Option funds systematically (or STP into Direct Option of same funds if you prefer them), while reinvesting proceeds to your Direct Option funds by SIPs (never lumpsum) over next 2-3 years for rupee-cost averaging of your investment.
3. The cumulative higher returns due to lower expenses of Direct Option funds is significant in the long-term, and removal of all Regular Option funds declutters your portfolio too.
4. During this redemption / STP process, besides the grandfather clause, you should also avail full tax-free benefits up to an aggregate equity LTCG of 1 lakh in each financial year, after which 10% LTCG tax kicks in.
5. Any lumpsum redemption, whether with LTCG or STCG, should be opted only if you need money at short notice as a last resort, which should be avoided, or for rebalancing windfall gains in any of your funds.
6. Lumpsum withdrawal, from a Regular Option fund for immediate lumpsum reinvestment in Direct Option of the same fund, even after allowing 1 year for LTCG tax purposes, "may seem" to be logical with the "presumption" that it will only look northwards now.
7. But, if the NAV slides further and continues its southwards journey during the year, after your lumpsum reinvestment, you're bound to rue your decision.
8. Yes, it may go up too which nobody knows, but in MFs investment we can avoid this "headache of meticulous timing", inculcated by our direct stock trading mindset, by spreading both our withdrawals as well as our reinvestment within a reasonable time frame for rupee-cost averaging of our total long-term investment, including the Regular and Direct funds.
9. We should, therefore, stop further SIPs of Regular Option immediately, but prefer systematic 1-yr+ withdrawal / reinvestment to avail LTCG benefits in a couple of years (or within a year if you feel so) instead of a lumpsum knee-jerk decision, as no one can predict the future market either way.
10. By the way, your money still remains invested at all times, albeit in two options for a couple of years more, so that you are not missing out on the power of compounding.
11. Equity MFs work best as 5-yr+ long-term systematic investments, never in lumpsum, by letting your regular net surplus savings to grow by the power of compounding and rupee-cost averaging.
12. Investments already made in Regular Option funds are your allocations "till now", and should not be the end of your investments.
13. All new allocations can be done systematically in Direct Option funds during the remaining earning years.
14. You can STP or systematically redeem Regular Option funds in 1/2 (ideally 3+) years, never single lumpsum, for availing the benefits explained, which will outweigh the higher fund expenses incurred on their reducing balances during this transition phase.
2. You should redeem your 1-yr+ old Regular Option funds systematically (or STP into Direct Option of same funds if you prefer them), while reinvesting proceeds to your Direct Option funds by SIPs (never lumpsum) over next 2-3 years for rupee-cost averaging of your investment.
3. The cumulative higher returns due to lower expenses of Direct Option funds is significant in the long-term, and removal of all Regular Option funds declutters your portfolio too.
4. During this redemption / STP process, besides the grandfather clause, you should also avail full tax-free benefits up to an aggregate equity LTCG of 1 lakh in each financial year, after which 10% LTCG tax kicks in.
5. Any lumpsum redemption, whether with LTCG or STCG, should be opted only if you need money at short notice as a last resort, which should be avoided, or for rebalancing windfall gains in any of your funds.
6. Lumpsum withdrawal, from a Regular Option fund for immediate lumpsum reinvestment in Direct Option of the same fund, even after allowing 1 year for LTCG tax purposes, "may seem" to be logical with the "presumption" that it will only look northwards now.
7. But, if the NAV slides further and continues its southwards journey during the year, after your lumpsum reinvestment, you're bound to rue your decision.
8. Yes, it may go up too which nobody knows, but in MFs investment we can avoid this "headache of meticulous timing", inculcated by our direct stock trading mindset, by spreading both our withdrawals as well as our reinvestment within a reasonable time frame for rupee-cost averaging of our total long-term investment, including the Regular and Direct funds.
9. We should, therefore, stop further SIPs of Regular Option immediately, but prefer systematic 1-yr+ withdrawal / reinvestment to avail LTCG benefits in a couple of years (or within a year if you feel so) instead of a lumpsum knee-jerk decision, as no one can predict the future market either way.
10. By the way, your money still remains invested at all times, albeit in two options for a couple of years more, so that you are not missing out on the power of compounding.
11. Equity MFs work best as 5-yr+ long-term systematic investments, never in lumpsum, by letting your regular net surplus savings to grow by the power of compounding and rupee-cost averaging.
12. Investments already made in Regular Option funds are your allocations "till now", and should not be the end of your investments.
13. All new allocations can be done systematically in Direct Option funds during the remaining earning years.
14. You can STP or systematically redeem Regular Option funds in 1/2 (ideally 3+) years, never single lumpsum, for availing the benefits explained, which will outweigh the higher fund expenses incurred on their reducing balances during this transition phase.