Mutual fund questions
SIP mechanics, direct versus regular plans, expense ratios and how gains are taxed.
Is a SIP better than a lump sum?
A SIP spreads entry across market levels and suits money that arrives monthly. For a windfall with a long horizon, staggering over a few months balances timing risk against time in the market.
What is the difference between direct and regular plans?
Same portfolio and manager; regular plans embed distributor commission in the expense ratio. The 0.5% to 1% annual difference compounds into a visible NAV gap over a decade.
How are equity mutual fund gains taxed?
Units held over 12 months attract long-term capital gains tax at 12.5% above the annual exemption; units sold within 12 months attract 20%. Debt scheme gains are taxed at slab rates regardless of holding period.
How many funds should a portfolio hold?
Three to five schemes across market caps usually covers diversification. Beyond that, holdings overlap heavily and tracking becomes harder without improving risk-adjusted return.
Does a low NAV mean a fund is cheap?
No. Returns depend on the percentage change in NAV. A scheme at Rs 15 and one at Rs 450 holding the same portfolio deliver the same return.
What happens if I stop a SIP?
Existing units stay invested and continue to move with the market. Stopping only halts fresh instalments; redeeming is a separate instruction and triggers exit load and tax where applicable.