Ask our experts- June 2022

I have been investing in banking and PSU funds as they are relatively stable, safer, and liquid scheme in the debt mutual fund. But with RBI raising the interest, should I exit from my investments in banking & PSU fund?

As you know that the debt mutual fund portfolio includes bonds. When there is a rise in the bank interest rate then it will adversely affect the bond price as well as the performance of the debt mutual funds. As the economy is facing a higher inflation, we are expecting the interest rates to increase in the near term, so we suggest you shift the investments into Liquid mutual funds.

The mutual fund I am investing in has not been performing well for the last 2 years. Is it advisable to switch to a high-performing mutual fund? Can I switch from funds of one AMC to another?

You have not mentioned the name of the scheme you invested in. We can’t give any suggestions without analyzing the fund portfolio. During the last two years the market performed well and most of the mutual funds have been delivering good returns. If the performance of the scheme is below the category average, then you may shift to other schemes after consulting with your advisor.Switching from one scheme to another within the AMC is possible whereas switching from one AMC to another AMC is not permitted.

I have invested in ELSS funds through SIP in July 2019 and will complete the mandatory lock-in period of three years. Please advise as I am confused about when I can sell my investments in these tax savings schemes.

It is not mandatory that the ELSS investments should redeem after its lock in period. If the funds are performing well then you may keep the fund in the same ELSS scheme (and redeem as when required amount)
As far as the SIP investments in ELSS is concerned, the redemptions are permitted for the units which have already completed the lock-in period of 3 years. For eg. the units you acquired in March 2019 will be ready for redemption from April 2022 onwards.

I have just started investing and have a small investible surplus of Rs. 10,000 per month. My friend told me that given the volatility in the market it is best to invest in funds which spread the investments across market capitalizations such as flexi-cap or multi-cap fund. Could you explain the difference between a flexi-cap and multi-cap fund?
A Multi-cap Fund has to invest at least 75% of its total assets in equities, with an allocation of 25% in large-cap,25% in mid cap, 25% in small cap. The flexi-cap category of equity funds, on the other hand, will invest at least 65% of the total assets in equity investments without any defined limits in terms of exposure they should take to large-, mid- or small-cap segments. If you want to limit minimum allocation towards different asset capitalisation, then you may choose multi cap category fund.

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