Buying mutual fund units in your fiancé’s name would make it a third party payment. By law, such payments are not accepted by mutual funds, except in case of payment made for a child by his parents/grandparents/related persons, or in case of payment by an employer for an employee, or by a custodian on behalf of an FII/FPI or a client.
As far as transfers are concerned, according to SEBI regulations mutual fund units are freely transferrable. However mutual funds restrict the transfer by way of a disclosure in the offer documents, by issuing account statement instead of a unit certificate. If unit certificates are obtained (by paying the required stamp duty and completing the formalities) then they can be transferred. Additionally, if your units are held in the demat form they can be freely transferred, according to demat regulations.
However I would rather suggest, instead of undergoing all the hassles involved in a transfer, that you add your fiancé as a joint holder in your account. This way she becomes a co-owner of the units. Or your fiancé can be made a nominee in your account.
Investors who go for the Growth option do not receive any interim payouts from the scheme. When they redeem their holding they may get capital appreciation, which is the growth in their invested capital. This is from the accumulated returns of the fund. Whereas investors choosing the Dividend option expect to receive payouts, subject to dividend distribution tax. Their invested capital does not appreciate as much, as the appreciation in the fund’s portfolio is paid out as dividends. Thus the portfolios, % return in both options generally remain the same although the NAVs would differ.
Generally investors go for Dividend option for two reasons, it may be taxed favorably than capital gains in some non-equity investments or they require regular streams of income from their investment.
Therefore if you need regular income, then you may go for Dividend option or else opt for Growth option. In future if there is any need for income from your investments, you could always do an SWP (Systematic Withdrawal Plan).
Investors need to understand that Equities has a potential to give high returns, but it is also a high risk asset class. So, the trick is, the longer you stay invested the chances are your investments will average out market volatility and generate good long term returns. Also, you must only cash out your investments in two conditions – If you have met your financial goals or if you are in a need of some urgent money. I understand it is neither of a situation for you, so in my view - stay invested. SIPs are one of the best ways to invest in equities. Therefore you should re-start your SIP after analyzing the suitability of the fund for you - based on your risk appetite. In addition to SIP, whenever the market declines, if you add a little more capital to your investments, then your IRR could be further enhanced.
Therefore, as long as it is a good fund that you are invested in, don’t be scared of market volatility or of the declining IRR. Over a long period of time, the potential to earn higher return from this asset class is still good.
I would also suggest that you consult a financial advisor before taking any investment related decision.
Subbu`s Solution is authored by I. V. Subramaniam. I. V. Subramaniam is a director of Quantum Asset Management Company Private Limited. The responses expressed here are strictly for information and explanation purpose only. The responses are meant for general reading purpose and not to be considered as an investment advice / recommendation. The responses are not intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or units of the Mutual Fund. Readers are advised to seek independent professional advice and arrive at an informed investment decision before making any investments. The Sponsor, The Investment Manager, The Trustee, their respective directors, employees, affiliates or representatives shall not be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including lost profits arising in any way from the information contained in the responses.
Please visit - www.QuantumMF.com to read Scheme Specific Risk Factors. Investors in the Scheme(s) are not being offered a guaranteed or assured rate of return and there can be no assurance that the scheme`s objective will be achieved and the NAV of the scheme(s) may go up or down depending upon the factors and forces affecting securities markets. Investment in mutual fund units involves investment risks such as trading volumes, settlement risk, liquidity risk, default risk including possible loss of capital. Past performance of the Sponsor / AMC/ Mutual Fund does not indicate the future performance of the Scheme(s). Statutory Details: Quantum Mutual Fund (the Fund) has been constituted as a Trust under the Indian Trusts Act, 1882. Sponsor: Quantum Advisors Private Limited. (liability of Sponsor limited to Rs. 1,00,000/-) Trustee: Quantum Trustee Company Private Limited. Investment Manager: Quantum Asset Management Company Private Limited (AMC). The Sponsor, Trustee and Investment Manager are incorporated under the Companies Act, 1956.
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