Skip to main content

Selling is a critical activity in investment process

 

ONE of the questions that investors have with respect to their equity mutual fund holdings is for what time period they should hold their investments and when they should sell them. There is no easy answer to this and the end result would actually vary with individuals, but it's important to check a few things before deciding on the time to divest holdings.

No decisions are perfect, but when made in a proper manner, the chance of acceptance increases without much problem.


Beneficial: Investors look at decisions beneficial for them. In the actual sense, any investment that results in a gain for the investor is beneficial as far as they are concerned.
When it is for equity-oriented funds, then there is another condition that is also beneficial. There will be a lower rate of tax for the holdings that are long term in nature.

If the holdings are maintained for more than a year, then the rate of tax on the investment will be zero and, hence, this will turn out to be beneficial on the net impact basis.


This is the reason why the investor needs to consider the actual position of the holdings before they finalise a decision.


Objective: Another factor that actually determines the holding period of the investment is the investor's objective. Investors need to consider whether their objective behind investment is actually being achieved.


It could be that in a time period of three years or even one year, the objective for which the investment was made, has actually been accomplished. Then this should be the time when they can sell the investment.

This is the best way by which the decision can be taken and, hence, this has to be understood and the necessary amount of comparison made when the decision to sell has to be considered.


Change: A condition that can often trigger a decision to sell a particular investment is the condition with respect to the investment has changed. For example, an investor might want an exposure to large cap stocks, so they might have selected a specific fund that invests in this particular area. Now after some time, they might find that the fund actually holds half its portfolio in mid-cap stocks.

This goes against the requirement of the investor. This change is not something that they can actually bear for this particular investment. This becomes one of the conditions when they should think about selling the investment and switch to some other area where their objectives would be better achieved.


Slippage: There is also the situation wherein the performance of the fund could be slipping. Many investors act in haste and quickly sell off their investment when there are a few months of underperformance of the fund. This might not be the best way to go about the entire process because the fund could soon be on the path of growth and this could have been a temporary situation. That is the reason why investors actually need to watch for several quarters whether the poor performance is on account of some specific condition.

If this is the case, then the way to remedy the situation should be checked and when things do not look too good, then the decision to sell the investment would be appropriate. Otherwise, if the situation is good, then they should give time to the fund to start performing again. The other thing that also needs attention is the likelihood that there will be deterioration in the investment's performance. Then this could become a reason why the investor would want to sell the investment.

 

Popular posts from this blog

What is Electronic Clearing Service (ECS)?

  As the name suggests, it's an electronic process through which money can be transferred from one bank account to another. According to RBI, this mode is usually used for regular payments and receipts, like distribution of dividend, interest, salary, pension etc. This mode is also used for collection of bills for telephone, electricity, water, various types of taxes, payment of EMIs , investments in mutual funds , payment of insurance premium etc. There are two types of ECS , like most other banking transactions, ECS credit and ECS debit. An ECS credit is used by a bank account holder , usually a large company or an institution for services like payment of dividend, in terest, salary, pension etc. If your mutual fund pays you dividend to your bank account, of all probability it is being paid through ECS credit.ECS debit, on the other hand, is used when a company or an institution is getting money from a large number of people. For example if you are investing in a mutual fund sc...

Equity Savings Fund

Invest Equity Savings Fund Online   The best part about these funds is that they are subject to equity fund taxation and at the same time are structured like MIP like funds . This new category, equity savings funds , offer a little of everything. They allocate money to equities & equity related instruments, and fixed income. They aim to generate returns by diversification. Such funds invest in fixed income and arbitrage to protect the investors from short term volatility and equity for capital gains. The best part of these funds is that they are subject to equity fund taxation and at the same time are structured like MIP funds.   MIP funds however are subject to debt fund taxation. Investors Equity savings funds are suitable for the following: First time investors who seek partial exposure to equity with less volatility and greater stability Investors seeking moderate capital appreciation with relatively lower risk Those wh...

WEALTH TAX

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300 WEALTH TAX   WHAT CONSTITUTES WEALTH? For wealth tax purposes, "wealth" means property , urban land, car, jewellery , yacht, boat, aircraft and cash in hand in excess of Rs 50,000. CAUTION POINT | Do not think you will have an easy escape from wealth tax by transferring your `wealth' without consideration to your spouse or minor child. Such assets will also be considered as your wealth. HOW TO DETERMINE YOUR TAXABLE WEALTH Add the taxable value of the above assets (computed as per the detailed rules for valuation) owned by you as on March 31 (for FY 2014-15, it will be March 31, 2015). In case you sold your car during the year, it will not be taxable wealth. Deduct loans if any obtained by you to acquire any of the taxable assets from the value of gross tax out for at least 300 days in a...

How to Pick Top Performing Mutual Fund Schemes

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   How to Pick Performing Schemes  Funds that continue to stay in the top grade of performance over longer periods are the ones to bet on, advise investment experts   The mutual fund performance charts of the past few months make for an impressive reading. Funds across all categories boast of stellar returns. Sample this: The mid and small cap category has averaged 77 percent return over the past 12 months, with the best fund delivering a staggering 120 percent. The tax-saving funds also average an impressive 51 percent, including a fund which has soared 92 percent. Many of the table-toppers are funds of proven quality and track record. However, there are also schemes that are not that well-known. Some of these have rarely made it to the performance charts in the past, yet, of late, they bo...

Section 80CCD

Top SIP Funds Online   Income tax deduction under section 80CCD Under Income Tax, TaxPayers have the benefit of claiming several deductions. Out of the deduction avenues, Section 80CCD provides t axpayer deductions against investments made in specific sector s. Under Section 80CCD, an assessee is eligible to claim deductions against the contributions made to the National Pension Scheme or Atal Pension Yojana. Contributions made by an employer to National Pension Scheme are also eligible for deductions under the provisions of Section 80 CCD. In this article, we will take a look at the primary features of this section, the terms and conditions for claiming deductions, the eligibility to claim such deductions, and some of the commonly asked questions in this regard. There are two parts of Section 80CCD. Subsection 1 of this section refers to tax deductions for all assesses who are central government or state government employees, or self-employed or employed by any other employers. In...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now