- Wealth PMS (50L+)
This page is Work-In-Progress and meant for Premium subscribers as a repository of our solutions for specific financial objectives.
In making these choices, we are not necessarily looking for the most feature-rich product but one that gives us the best chance of meeting the objective it is meant for. Before investing in any product listed here, make sure to read the companion posts with the rationale of why we picked what we did. Our longer-term wealth-building strategies are available in the form of the Model Portfolios here.
[Updated Oct 2020]
I will need a lump sum amount to pay for a specific objective within a period of 11 months or less. I have the money now. Where should I park this money till I need it?
Here, we see that arb fund returns have dropped below 4%, so it’s not quite as recommended to go with them. Instead, we’ll suggest that the best way to park funds now is to use an IDFC First Bank Savings account . Indian scheduled banks have been safe enough (even Yes Bank depositors have not lost money) and this account provides 7% for less than Rs. 1 cr. in deposits.
At 7% pre tax and even 36% tax, this is a 4.48% post-tax return, which is higher than most liquid funds or arb funds as of the last three months.
For any higher amounts, or if this account gives you post tax returns that are below 3.5% then you should consider the Arbitrage funds as mentioned below.
[Jan 2020: Kept for posterity]
Buy Equity Arbitrage Funds. Make sure you buy the Direct Plans either directly from the AMC website, MF Utilities, or through independent platforms offering Direct Plans.
|1.||Kotak Equity Arbitrage Direct Plan||50%|
|2.||Nippon India Arbitrage Direct Plan||50%|
Budget 2020 has changed this section. From April 1, 2020, dividend is taxed in your hands, not at the mutual fund level. This means you should not use the dividend reinvestment option, but use the growth option instead. That will give you capital gains when you exit, but short term capital gains taxes are only 15%. (Your tax bracket may be higher)
Redeem 5 working days before you need the money.
Any changes to Income Tax rules around the classification of arbitrage funds as equity funds can increase applicable short-term taxes. If that happens, this section will be updated.
[Updated March 2020]
Which long-term tax-efficient mutual fund should I invest in?
Buy ELSS (Equity Linked Savings Scheme) Mutual Funds with track record of beating the category average over 1, 3, and 5 year annualized returns while demonstrating lower volatility.
Axis Long Term Equity Fund – Growth
As a minimum, ensure covering 80C deduction of 1.5L, increase up to any amount you know you will not need for at least 3 years. Pick the Direct Option.
Important Disclaimer: The products and strategies on this page are based on what we typically implement, for ourselves and our families. We do not receive any commercial considerations from the makers of the products on this page. If we do, we will see it stated clearly and unambiguously. At no point should you consider what’s on this page to be tailored advice or a promise or guarantee of specific returns. You are the best judge of whether they make sense for you, given your unique situation, willingness and ability to take the applicable risk. If you see an error in how we have interpreted the potential risk or return of a product, let us know on slack. We live to learn.