Does an investor get the benefit of dividends when they invest in mutual funds? I had invested in a ULIP a few years back that invests all of its assets in equities. Today, I am facing losses of Rs 2,000 in it. Should I move to debt or continue in equity?
-Abhishek
When you invest directly in shares, the dividends you get are tax-free. In the case of mutual funds, if you opt for the dividend option, the dividends you get are tax-free here as well.
To answer your second question, we believe that ULIPs aren’t the best investment vehicle. Your decision to move out of the ULIP you’ve invested in depends on how old your policy is. If you have paid the premium for 3 years, you won't face any forfeiture if you stop paying any more. But don’t redeem your investments before 5 years, because the surrender charges will be high. Study your policy document carefully before you opt out of the ULIP.
This article was originally published on April 10, 2012.
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