1. When the purpose of your existing fund ceases to exist, you should SWP / STP its accumulated corpus, because investing, like life's most other activities, should be primarily need/goal-based, by focusing on yourself, your income, your savings, and your needs.
2. If your fund corpus is significantly large, you should SWP / STP it by optimizing both your LTCG and STCG each year, keeping tax differential of 5% and annual LTCG tax exemption of 1 lakh in mind.
3. Because of the grandfathering clause, LTCG from any date of purchase up to Jan 31st, 2018 will always remain tax-free, provided you sell any time after 365 days from the purchase date of a unit.
4. You should, therefore, SWP / STP them utilizing the new LTCG exemption limit of 1 lakh too, by calculating it after the grandfathered date of 31st Jan 2018.
5. Remember that 1 lakh LTCG tax exemption is on booked profits only, i.e. after funds are redeemed.
6. If you have need for an alternative new fund (or other existing funds) in mind, systematically investing in it through STP, or from your bank or a liquid fund through SWP, will be beneficial, instead of lumpsum action, as it will enable cost-averaging the new purchases for continuing this exercise in the long-term when needed.
7. As they will be of different AMCs, you can SWP your old fund into your bank in 1-2 years, by optimizing your LTCG through existing tax benefits, and simultaneously activate new SIPs for reinvesting the amount into your selected new funds during 1-2 years for cost-averaging them.
8. As differential of STCG tax and LTCG tax is only 5%, you can also do this exercise in the short-term itself, if deemed fit by you, as there's no limit on STCG, which can even enable offsetting any other STCL during the year.
9. If you're earning windfall gains through STCG, 1% exit load would also turn out to be minuscule.
10. You should also utilize windfall gains in this corpus to systematically invest in an ELSS fund to avail additional Sec 80C benefits too, to the extent required by you.
11. Always go for Growth option in all funds, being more amenable for redeeming units to avail the annual tax exemption on 1 Lakh LTCG limit from this year, if you like to, besides giving you flexibility in reinvesting redeemed amounts systematically for cost-averaging, as the same exercise could be repeated each year.
12. Please remember that STP from an already invested amount from one MF to another MF of the same fund house actually involves simultaneous redemption and purchase, both of which should be done with minimal effect of charges and taxes on the value realized as far as possible.
13. STP route is actually an extension of SIP way of investing - while SIPs allow you to invest small amounts, STPs enable you to transfer a large amount - into funds of your choice at regular intervals of the same fund house.
14. It is, therefore, worthwhile to hold the redeemed money of your old equity fund in a low-risk debt fund of the fund house and periodically keep switching a part of it into your new equity funds using STP.
15. You can also use STP to transfer your money into more than one new fund at the same time.
16. STP in an equity market works best when the market exhibits volatility as you can reduce the risk of over-exposure to equity which may happen in the lump sum mode of investment.
17. Through STP, you can continue to earn returns on the old lump sum, even as you do cost averaging of new funds by systematic investing.
18. Another benefit of STP is that even if NAV declines in one fund, it’s possible that it may rise in the other scheme, limiting your losses.
19. It is, therefore, best to activate an STP, without incurring switching costs, by redeeming your old equity fund into a short-term debt fund, and then use another STP to invest from it into your new fund periodically as per your convenience.
2. If your fund corpus is significantly large, you should SWP / STP it by optimizing both your LTCG and STCG each year, keeping tax differential of 5% and annual LTCG tax exemption of 1 lakh in mind.
3. Because of the grandfathering clause, LTCG from any date of purchase up to Jan 31st, 2018 will always remain tax-free, provided you sell any time after 365 days from the purchase date of a unit.
4. You should, therefore, SWP / STP them utilizing the new LTCG exemption limit of 1 lakh too, by calculating it after the grandfathered date of 31st Jan 2018.
5. Remember that 1 lakh LTCG tax exemption is on booked profits only, i.e. after funds are redeemed.
6. If you have need for an alternative new fund (or other existing funds) in mind, systematically investing in it through STP, or from your bank or a liquid fund through SWP, will be beneficial, instead of lumpsum action, as it will enable cost-averaging the new purchases for continuing this exercise in the long-term when needed.
7. As they will be of different AMCs, you can SWP your old fund into your bank in 1-2 years, by optimizing your LTCG through existing tax benefits, and simultaneously activate new SIPs for reinvesting the amount into your selected new funds during 1-2 years for cost-averaging them.
8. As differential of STCG tax and LTCG tax is only 5%, you can also do this exercise in the short-term itself, if deemed fit by you, as there's no limit on STCG, which can even enable offsetting any other STCL during the year.
9. If you're earning windfall gains through STCG, 1% exit load would also turn out to be minuscule.
10. You should also utilize windfall gains in this corpus to systematically invest in an ELSS fund to avail additional Sec 80C benefits too, to the extent required by you.
11. Always go for Growth option in all funds, being more amenable for redeeming units to avail the annual tax exemption on 1 Lakh LTCG limit from this year, if you like to, besides giving you flexibility in reinvesting redeemed amounts systematically for cost-averaging, as the same exercise could be repeated each year.
12. Please remember that STP from an already invested amount from one MF to another MF of the same fund house actually involves simultaneous redemption and purchase, both of which should be done with minimal effect of charges and taxes on the value realized as far as possible.
13. STP route is actually an extension of SIP way of investing - while SIPs allow you to invest small amounts, STPs enable you to transfer a large amount - into funds of your choice at regular intervals of the same fund house.
14. It is, therefore, worthwhile to hold the redeemed money of your old equity fund in a low-risk debt fund of the fund house and periodically keep switching a part of it into your new equity funds using STP.
15. You can also use STP to transfer your money into more than one new fund at the same time.
16. STP in an equity market works best when the market exhibits volatility as you can reduce the risk of over-exposure to equity which may happen in the lump sum mode of investment.
17. Through STP, you can continue to earn returns on the old lump sum, even as you do cost averaging of new funds by systematic investing.
18. Another benefit of STP is that even if NAV declines in one fund, it’s possible that it may rise in the other scheme, limiting your losses.
19. It is, therefore, best to activate an STP, without incurring switching costs, by redeeming your old equity fund into a short-term debt fund, and then use another STP to invest from it into your new fund periodically as per your convenience.