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Mutual fund units can neither be transferred from one holder to another, nor gifted to another person

LiveMint logoLiveMint 19-04-2017 Srikanth Meenakshi

If my wife buys a mutual fund from her savings (tax is paid on those savings) and then she transfers it to me immediately; will there be any tax implications on this as the mutual funds are being given to husband, which is being shown as gift by wife to husband?

—Tejas Shah

The answer to this question is exceedingly simple: the scenario that you are describing is just not possible. Units of a mutual fund cannot be transferred from one holder to another, nor can they be gifted by one person to another. Mutual funds are also not allowed to accept ‘third-party’ payments—meaning, you cannot use money from your wife’s bank account to make investments in your name.

If you want the units to be in your name, your wife would need to first transfer the cash to your account (or a bank account where you are a joint holder), and then you can use that amount to invest in the fund in your own name.

The only situation in which the units from a mutual fund folio can be transmitted from one holder to another holder (and a different folio) is upon the demise of the holder of the source folio.

I am 61 years old and want to start investing in mutual funds. Though I have a disciplined financial life, my computer literacy is not enough for me to track funds online. What is the fastest offline way of tracking my investments? Please tell me all the options that are available.

—Raman Awasthi

When it comes to online and offline investing, there are different ways to go about it, depending on your level of comfort. One can invest and track online, or invest offline and track offline (using either financial news portals or on-demand email statements), or invest and track offline. Among these, the first one is more efficient, but if you are not comfortable with investing or tracking online, you are not without options.

To do effective tracking using offline mechanisms, please ensure that you use a same, correct address in all your mutual fund folios. If you are investing on a monthly basis (using SIP, for example), then the mutual fund company will send you a transaction statement containing, among other things, the current number of units in the folio.

You can maintain a collection of these statements and keep a ledger of these transactions to track them by yourself. More importantly, the depository services providers will also send you a comprehensive, consolidated account statement once every 6 months, which will detail all your holdings and transactions for the past 6 months. Between the transaction statements and the consolidated statement, you will have a very good track of how your money is doing.

I am currently investing Rs5,000 per month in five funds each. Large-cap—BSL Frontline Equity Fund and Franklin India Bluechip Fund; Multi-cap/flexi-cap—L&T Equity Fund and I-Pru Value Discovery Fund; and Franklin India Prima Fund. Should I continue SIPs in these funds? Also, I am looking to start three new SIPs of Rs5,000 each, for long term horizon of 8-10 years. Please suggest three good funds to invest in (including mid-cap and small-cap funds) for my new investments, keeping in view my existing ongoing SIPs as well.

—Prerna Gupta

You are presently investing 40% in two large-cap funds, 40% in two multi-cap funds and 20% in a mid-cap fund. Most of the funds you are investing in are pretty good funds as well. However, I would suggest a couple of minor changes—one to your allocation and, consequently, the other to your fund choices. In such portfolios, it is typically good to have more than one mid-cap fund to bring in a diversity of fund management styles to the portfolio. However, I would not want you to increase your mid-cap allocation to 40% in the portfolio since that would bring in too much risk. So, I would recommend that you change your multi-cap allocation to 30% and reduce it to one fund. You can move the remaining 10% to the mid-cap segment, increasing it to a total of 30%, and split it evenly (15% each) between two funds. Consequent to this, you would also need to revisit your fund choices. I would recommend that you retain the ICICI Prudential fund in the multi-cap segment. You can move out of the L&T Equity fund (a diversified fund) and into L&T India Value fund—a highly rated mid-cap fund. At the end of this shuffle, you’ll be investing Rs 5,000 each in two large-cap funds, Rs 7,500 in a multi-cap fund, and Rs 3,250 each in two mid-cap funds (L&T India Value fund and Franklin India Prima fund).

As far as the new money goes, you do not need fresh schemes to invest it in. You can spread out the Rs15,000 in these five funds in the same proportion—by adding Rs3,000 each to the large-cap funds, Rs4,500 to the multi-cap fund, and Rs 2,250 each to the mid-cap funds.

Srikanth Meenakshi is co-founder and COO,

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