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From Equity To Debt

Move your equity investments to debt in tranches as you approach your financial goal…

I have invested in equity funds and want your advice on moving my equity fund holdings to debt as I am approaching my financial goal. Also, if I want to switch from an underperforming fund to a better fund, should I shift in lump sum?
- Vinit Pathak

The volatility in the stock markets can impact the returns on your funds when you need it the most. It is for this reason that we advice investors to move their investments into debt funds that are stable with returns and less volatile as they approach their financial goals. This is to cushion the impact of the markets on equity funds. You should consider moving your equity investments to debt as well as you are approaching your financial goal. Move the funds in tranches to gain from the highs of the markets.

If you are convinced of the that your under-performing is likely to remain one, then you can completely switch investment to a better fund. However, take a note of the tax incidence, i.e. possible short-term capital gains tax on investment made within one year.

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