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Gauging Gains

Exit loads and long-term capital gains are quite unrelated

I want to invest Rs 6,000 per month in an SIP. How can this investment be distributed and in which funds should I invest? Separately, if there is an exit load for three years in any equity fund, would I be able to get long-term capital gains if I sell off the units in one year?

As far as your first question is concerned, a first-time investor should invest in one or two balanced funds and invest in it on a regular basis. Balanced funds are treated like equity funds only. Secondly, exit loads and long-term capital gains are not related. Load structures depend on a fund’s terms and conditions. Some time ago, most fund companies had revived their exit load structures in a way that if you redeem your money within at least three years, then an exit load would be applied. But there are rapid changes being made. Now, most of the companies have more or less decided on a somewhat common exit load structure, which is that if you exit before one year then one per cent exit load would be charged, otherwise there would be nothing charged. A one-year investment in equity funds gives you the long-term capital gains advantage. There would be a number of changes in this especially after the announcement of the Direct Tax Code scheduled to be implemented from 2011.

How can I invest in an equity fund?

For mutual fund investments, you can go to the nearest bank. Apart from that, there are around 90,000 mutual fund advisors in the country. One can get information on them after logging on to http://www.amfiindia.com. Thereafter, type your pin code in the relevant place. Once that is done, the list of all the mutual fund advisors in your area would get revealed. Choose from that list.

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