Why it doesnt make sense to invest more than 5 lakhs in mutual funds

[ethan hunt]

I didnt understood that?

You meant in say 5 years (or less or more) total amount should less then 2 lacs or you meant 1 FY

AIR (Annual Info Report) is sent by AMC/MF to IT Dept if investment by one investor crosses 2 Lac.

Just like Credit Card spends in excess of 2 L are reported (AIR) by banks to IT Dept. but in this case it has to be in a Fin Year.

In case of MF the words 'in a year' in AIR rules is missing, hence it means that TOTAL investment even if spread over several years will be counted towards Rs.2 L.

Investors have even got IT notices when they shift moneies from one scheme to another in same AMC/MF, because though they have invested less than 2 L but the current value is more than 2 L & shifting from one sceheme to another caused the 2 L limit to trigger.

 

[TracerBullet]

AIR (Annual Info Report) is sent by AMC/MF to IT Dept if investment by one investor crosses 2 Lac.

Just like Credit Card spends in excess of 2 L are reported (AIR) by banks to IT Dept. but in this case it has to be in a Fin Year.

In case of MF the words 'in a year' in AIR rules is missing, hence it means that TOTAL investment even if spread over several years will be counted towards Rs.2 L.

Investors have even got IT notices when they shift moneies from one scheme to another in same AMC/MF, because though they have invested less than 2 L but the current value is more than 2 L & shifting from one sceheme to another caused the 2 L limit to trigger.

I have 2L+ in some AMCs for some time, never had any notice. It makes no sense unless IT people have nothing better to do.

There used to be requirement to disclose high value transactions ( with 2L+ for Mutual funds etc), but it seems to have been removed. They do get these details from the company directly.

Anyway, i think if you pay all your taxes and file returns disclosing all capital gains then you should be ok. This article seems helpful.

IT guys are getting better in detetcting stuff it seems, If you want to hide income and avoid scrutiny then i dont know, i guess avoid anything that needs PAN !

 

[aryabhatta]

I have been diligently investing in MFs since last few years and being from finance background and AMFI certified I believe I have better perspective of choosing investments.

I invested in one of the best funds (those were when at time of investing) after doing lot of research and going through research advisory services like valueresearchonline ,etc.

But even after 8 yrs my portfolio IRR comes around only 20%

If your investment amount is less than 5 lakhs and u cant directly invest in stocks then MFs is a best way. But considering 1.5% expense ratio for direct investments if ur investment value is more than 5 lakhs then u end up paying more than Rs 8000 as fees annually !!

And these research advisory services keep changing their stars (or grades or whatever) So when we look at 5 star rated funds then it looks lucrative but when the fund underperforms then these people simply changes their stars to another fund to fool new investors.

I think 20% irr can be easily achieved through fundamental research reports and good quality stocks. No point in paying high fees when nothing extra ordinary result is obtained.

I don't think money can be made in mf's over the long run unless one is lucky.

Numerous studies have shown 80%+ of mf's under perform the market index over time and that the top 20% performing funds every year are rarely in the top 20% performing funds in the next year.

So you have to be very lucky to consistently pick the top 20% funds every year otherwise as you correctly mentioned you just end up paying management fees plus lose money because they under perform the market index over time.

Best is just to invest in index funds via regular sip over a long period of time also known as passive investing.

However 5 lakhs is not necessarily too little to invest in stocks over the long run you could consider value investing and may be able to make a reasonable return over time

 

[romy]

Can somebody throw light on some good ELSS FUNDS

 

[OMSAI]

Can somebody throw light on some good ELSS FUNDS

You can't exit from ELSS fund before three Years........it's school to enter MF.....:thumb:

 

[Smart_trade]

Can somebody throw light on some good ELSS FUNDS

Best performance on various timeframes is from Reliance Tax Saver . It is ELSS fund which has 3 years lock in.

Smart_trade

 

[romy]

Thanks for prompt reply . my enquiry was for tax saving purpose .

 

[romy]

I shall look for above mentioned ELSS fund