I want to know about what kind of thinking goes into the process of getting into mutual funds. Should we treat it like equity in which we sell off when markets go up and keep a close eye on it and then buy when NAVs come down? Also, I have subscribed to four funds, Franklin Templeton Prima Plus, HDFC Equity, Reliance Vision and DSPBR Tiger. I had invested in bulk in 2006, but then incurred losses. I have shifted to SIPs since then. My investment horizon is for the long- term (not less than 15-20 years).
It is very difficult to think in those terms, but if you can carry it off, give it a try. However, there is an easier way. Investing consistently is relatively easy. When you are close to reaching your investment goal, you should gradually withdraw the money. Whenever you want money, you should methodically plan the withdrawal process – around one-to-one-and-a-half years earlier. Bringing out and putting in your money should be consistent because it would be difficult to know how the markets would do when you actually want to take your money out.
It might be possible that, despite all your investment efforts, you may not achieve your goals. You can bring out the money and keep it in a bank, though it will have a nominal return. All savings and investment objectives are to achieve goals and it cannot be dependent on the markets. You can trust the market to go up in the coming 10 years, but you cannot trust the markets to remain up when you want to bring out your money as it may have fallen at that particular point in time.
I have some long-term SIPs running. If I invest Rs 10,000 for a short-term, say one year on Rs 10 NAV and I bring out money in six months with profit, how much short-term capital gain would I have to pay?
Short-term capital gains tax is 10 per cent. You will have to give that much on whatever profits you make.