Investment

How should I decide when to exit my stock investments?

I have recently started investing in stocks and plan to invest actively for the next 15 years. Should I book profit when I reach a target and reinvest at a lower level? Or should I hold the shares for the entire 15 year period and buy more when the price falls?

Raj Khosla, Founder and Managing Director, MyMoneyMantra.com, replies:

Direct investment in equity markets is a high risk-high return proposition. It is somewhat impossible to time equity markets and therefore investing at lower levels is not always possible. Opt for a Systematic Equity Plan (SEP) of select stocks, basis fundamentals. You should definitely book profits at regular intervals and continue investing according to your risk appetite. Do not put all eggs in one basket and also invest in diversified equity mutual funds through SIP route, with a horizon of 15 years. It is an absolute must that you regularly review your portfolio. Once you are nearing your goals, gradually shift into debt funds.

In an equity MF folio, I have a total of 120 units out of which 80 units have been held for more than year and 40 units for less than a year. If I redeem 75 units, then what would be the gain or loss?

Rushabh Desai, AMFI registered mutual fund distributor, replies: Mutual funds follow FIFO (first in first out) method during redemptions. This means when you redeem certain units from a particular folio, the units which were bought first would be sold first. Out of your total 120 units if you redeem 75 units then these units will be redeemed from the 80 units which you had bought first and are holding for more than a year. The gain or loss will depend on the difference between your purchase NAV and sale (latest) NAV of the units you wish to redeem. As the units you wish to redeem have been held for more than a year, the gains from your equity fund will attract LTCG tax of 10% plus surcharge and cess provided the gains exceed Rs 1 lakh. STCG tax of 15% plus surcharge and cess is only levied on equity units redeemed on or before a year. This taxation is based on the assumption your equity mutual fund is non international.

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