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How to balance your investment ?

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THERE has to be some effort undertaken by every investor to rebalance their mutual fund portfolio depending upon the changing circumstances. Often this requires a shift from equity investments to debt, at specific points of time. This will be important due to the fact that the money has to be invested in an area where the risk remains low, so that, a higher protection is present for the capital.

Such a situation normally arises at the time of retirement or when there is some occasion that requires a determined amount of funds.

Here is a way in which this situation can be effectively tackled using mutual funds.

Systematic withdrawal: The best way to ensure, that there is some amount that is being regularly withdrawn and then put aside for the purpose of additional use, is through the systematic withdrawal plan (SWP) route. The problem that often arises while withdrawing the amount is that there is no good time for doing so, especially in equity-oriented funds, as the equity markets are very volatile.

This is the reason why a simpler route is adopted, where the amounts will keep coming out of the investments in fixed sums at specific points of time without any extra effort. The SWP can be set such that a fixed sum, say Rs 15,000 per month, is withdrawn from the equity fund on the 15th of every month. This route is, however, useful only where there is some time present for the purpose of getting the money out, so that, the entire thing can be done in instalments over a period of one to three years.

Several batches: When it comes to something like retirement planning, then there is a long time period that is actually present and available for the purpose of completion of the entire withdrawal or transfer exercise. The time of retirement is known, so, there would be enough time that would be available beforehand for the purpose of ensuring that the withdrawal from equity and investment into debt is completed.

When this is the situation then the individual can ensure that they are able to slowly transfer the amounts when the conditions for this are suitable.

This can be done in a few batches. This will also ensure that there is not much pressure when it comes to the issue of making the transfers because there is reduced pressure on the investor.

Immediately withdrawal with a plan: There can be a situation, where, there is an immediate requirement of the funds for investment in the debt area due to the fact that there might be a good investment opportunity that could soon be over. It could also be because there is a small time window for the debt investment process to be completed.

The end result of the exercise is that the amount has to be present in a short term debt fund, while the question of actually withdrawing the amount is a tricky one. There has to be some element of care that is actually taken to ensure that the amount is withdrawn after proper thought, even though, this is in a lump sum.

The individual should always plan for this kind of thing, and hence, there should be some element of readiness that is present to tackle such a position so that they know the funds that will be sold in such a situation. This involves decisions such as selling funds that are doing well or those that are not doing well and whether entire investment in a fund is to be sold or only a part of it.

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  5. Reliance Tax Saver (ELSS) Fund
  6. IDFC Tax Advantage (ELSS) Fund
  7. SBI Magnum Tax Gain Scheme 1993
  8. Sundaram Tax Saver

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