12,352.35-3.15
Stock Analysis, IPO, Mutual Funds, Bonds & More

Can I sell my small cap fund and invest the money in ELSS to save taxes?

If you have any mutual fund queries, message on ET Mutual Funds on Facebook. We will get it answered by our panel of experts.

ET Online|
Dec 12, 2019, 04.42 PM IST
0Comments
Getty Images
Addition
I am 25 years old. I am investing Rs 1,000 through SIP in Mirae Asset Tax Saver Fund, Rs 2,000 in HDFC Small Cap Fund, and Rs 2,000 in ICICI Prudential Ultra Short Term Fund for an emergency fund. I can't take funds from tax saver since it has lock-in period. So can I withdraw money from the small cap fund and invest in tax saver fund? Should I withdraw money from small cap or should I invest in both small cap and tax saver funds for my retirement corpus?
-Yuvaraj Vaaji


First, you should choose your mutual funds based on your goal, horizon, and risk profile. Hope you have a very long investment horizon and aggressive risk profile to invest in small cap schemes.

Two, what are you planning to do is called recycling of investments. Many individuals take the money out from existing investments to take care of their tax-saving investment requirements. It is fine if you are short on money and can’t raise funds for tax saving investments. However, if you are doing it just for the sake of it, it is a bad strategy. When you do not make fresh investments, it will have an adverse impact on your long-term wealth creation. When you are essentially recycling your investments without committing fresh money, you lose out on many counts, especially your financial discipline.

Ensue that you save and invest at least 30-40% of your post-tax salary to retire rich.

Also Read

ELSS and IDFC Tax Advantage (ELSS) fund

What are the advantages of investing in ELSS?

Can I shift money from non-ELSS funds to ELSS funds to claim tax deduction?

Using dips to invest in ELSS

Market outlook is depressing. Does it make sense to invest in ELSS this financial year?

Comments
Add Your Comments
Commenting feature is disabled in your country/region.

Other useful Links


Copyright © 2020 Bennett, Coleman & Co. Ltd. All rights reserved. For reprint rights: Times Syndication Service