Money Matters

  • Ifthikar Bashir
  • Publish Date: Mar 12 2018 1:20AM
  • |
  • Updated Date: Mar 12 2018 1:20AM
Money Matters

I AM INVESTED IN MUTUAL FUNDS, BOTH SIP AND LUMP SUM, BUT I AM WORRIED BY THE SLOWDOWN IN THE INDIAN MARKETS? WHAT SHOULD I DO?

Aamir, via email

 

First and foremost, don’t panic. Understand that corrections like these are healthy for the market. Nobody would be happy seeing the value of their portfolio going down but we need to understand that these are notional losses and should not be made permanent by exiting the investments. Even though predicting markets is not easy, there are certain parameters such as corporate earnings that have picked up well since the last quarter and businesses are expected to do well. When earnings go up, it is reflected in stock prices and, consequently, the Net Asset Value of a mutual fund rises. In such times, we need to keep the bigger picture in mind. There is tremendous scope for wealth creation in the long-term and phases like these shouldn’t act as a deterrent. 

This example might make it easier to understand: Colgate would not sell fewer toothpaste tubes if its stock price falls. So, focus on business rather than the stock price, more so when the markets are bearish. My recommendation is to stay put and invest more when the prices are down and mood is pessimistic. That’s the way to go.

I HAVE A HEALTH INSURANCE POLICY OF RS 3 LAKH EACH FOR MY PARENTS. CAN I PORT THIS INTO A SUPER TOP-UP PLAN?

Anwar Ali, via email

 

Portability allows an individual to switch his health cover from one insurance company to another without losing the accumulated benefits such as no claim bonus, coverage for pre-existing diseases, etc. However, you can only port between policies of similar nature and category. Therefore, porting from a health insurance plan to a super top-up plan is not possible.

 

 

I HAVE PURCHASED REAL ESTATE IN THE NATIONAL CAPITAL REGION FOR INVESTMENT PURPOSES. SHOULD I SELL MY PROPERTY AT A LOSS AND INVEST IN MUTUAL FUNDS?

Syed Shadan, Noida, Uttar Pradesh

 

Property as an investment is struggling currently and might not revive soon. But if you want to liquidate the property, there are some factors you need to consider – the quality of the property, its age or location, facilities available in the vicinity. Generally speaking, you should look to sell at a reasonable price. Remember that property should be avoided as an investment option, not least because of the huge ticket size and poor liquidity. The entire investment has to be sold at one go. You may or may not be able to sell when you want to. Equity is a better investment option. It has a small ticket size, can be liquidated in small parts and it does not require maintenance. It is also quite transparent and returns are much better than property.

 

 

I AM A REGULAR INVESTOR IN MUTUAL FUNDS. I WOULD LIKE TO KNOW WHAT ADVANTAGE DO DIVIDEND REINVESTMENT PLANS PROVIDE? 

Mirza Owais, via email

 

Initially, most funds had dividend plans. A lot of investors decided they didn’t want dividends and so growth plans were introduced. For investors who chose dividend plans but don’t want dividends now, reinvesting dividends effectively converts their plan to a growth one. Most equity investment is meant for the long-term, the idea being to accumulate capital over time rather than get periodic income. You should thus choose a growth plan. So, logically, the answer to your question is, none.

If you have chosen the dividend option, giving an instruction to change from dividend option to dividend reinvestment will be seamless because this is a non-financial transaction. On the other hand, if you want to convert the dividend plan to a growth plan, that will amount to redeeming your investment from the dividend plan and making a fresh investment in the growth plan. The dividend will be reinvested in the fund without any load and the plan will effectively become a growth plan.

 

 

I AM A PRIVATE SECTOR EMPLOYEE AND AM INTERESTED IN INVESTING ACROSS MUTUAL FUNDS VIA SIP ROUTE. I AM TECH SAVVY AND FOLLOW MARKETS REGULARLY. IS IT BETTER TO INVEST MANUALLY EVERY MONTH INSTEAD OF THROUGH AN AUTOMATED SIP?

Shuaib, via email

 

I don’t see any value in doing that. SIPs are able to eliminate the emotion of being selective with your dates. Say, next week the market goes down by 4% on two specific dates. What will you do? Will you have the courage to invest after the first day? And will you have the same conviction on the second day? In 2008, there were many days when the market went down by 5% in single sessions. There have been similar situations on the upside too. You will start regretting, you will pause. That’s where an automated plan like SIP comes in. It eliminates the anxiety and indiscipline of the human mind.

 

 

I HAVE TWO SMALL KIDS AND I WANT TO INVEST FOR THEIR HIGHER EDUCATION. CAN A MINOR INVEST IN mutual funds?

Mohammad Rafiq, Lalbazar, Srinagar

 

A person below 18 years of age can invest in mutual funds, but only through a parent or legal guardian. The guardian can hold units of a mutual fund and transact on behalf of the minor. You need to furnish necessary documents such as proof of age and proof of the guardian’s capacity to hold and deal in mutual fund holdings.

 

I MOVED ABROAD FIVE MONTHS AGO AND WANT TO INVEST IN MUTUAL FUNDS. AS PER MY FINANCIAL ADVISER, I AM LEGALLY NOT ALLOWED TO INVEST IN MY OWN NAME. IS THAT SO? AS AN ALTERNATIVE, SHOULD I TRANSFER THE MONEY TO MY PARENTS’ ACCOUNT IN INDIA AND INVEST IN THEIR NAME FROM THEIR TRADING ACCOUNT?

Mir Javaid, via email

 

You have been misguided by your adviser. Firstly, you can invest in mutual funds from abroad or if you become a non-resident Indian. However, US and Canada-based NRIs are restricted from investing by most mutual fund houses. You will need to update KYC (Know Your Client) details with the change in residential status. As an NRI, you can invest in mutual funds either on repatriable basis or on non-repatriable basis. To invest on a repatriable basis, you must have an NRE (Non Resident Rupee) account with a bank in India. In this case, the investment amount should be remitted from the NRE account of the NRI investor. In case you choose the non-repatriable mode, you are allowed to use the NRO (Non Resident Ordinary Rupee) account. Note that fund investments in India cannot be made in a foreign currency.