MF Query Board
Being a retired individual, it is important not to just look at investment from one angle. In fact, you should take a more holistic view of your overall situation. Based on your query we don’t know how much risk you are able to take neither we know how much portion of your portfolio is dedicated towards small-cap funds. If you have experienced a fall in small-cap funds and are comfortable with the same then surely remain invested in small-cap fund. However, if that’s not the case then it would be always better to opt for multi-cap funds. Besides this, it is also important to have your retirement distribution plan with you. This will help you to understand the cash flows that you may expect during the retirement period. Also, it will help you in making your investment decisions. Having said that, retirement being more focused towards capital protection and less towards capital appreciation, it is important to first concentrate on protecting your capital. Taking more investment risks would only lead you towards trouble. Hence, it is recommended that first you assess your risk profile. Then based on your risk profile choose the retirement strategy that mostly suits you. Most probably it is better to opt for a bucket strategy as it focuses on capital protection along with capital appreciation. Regarding the fund that you have invested in, it has performed well in the long-term. We can see this from the performance table below.
As we can see from the table above, the fund in question is able to beat its benchmark and category in almost all the periods. Therefore, if your risk profile and retirement distribution plan permit to invest in small-cap, then you may continue your investment in Nippon India Small-Cap Fund. However, it is always prudent to review your portfolio periodically and if required re-jig annually.
It is obvious that the primary purpose of investing in ELSS is to avail tax deduction under Section 80C. However, rather than redeeming it to further spend for your financial goal, why not review and reinvest the same to create a loop for tax investing? Let us go through an illustration to understand it better. Say you have invested Rs. 1.5 lakhs in ELSS in FY 2019-20 which would be available for withdrawal in FY 2022-23. Then the investment in FY 2020-21 would be available for withdrawal in FY 2023-24 and the investment in FY 2021-22 would be available for withdrawal in FY 2024-25. Therefore, technically in these three years you are investing total of Rs. 4.5 lakhs in ELSS and are able to get a deduction in those respective years For more clarity, we took the NAV of an ELSS from FY 2014-15. Here we have considered that investment is done in a fund that was a top performer in the previous financial year. Following is the tabular representation of the analysis.
From the above tables you can see how you are able to avail tax deduction without any fresh investment. In fact, you are left with a surplus. However, there may be some instances wherein you would fall short to claim the deduction of Rs. 1.5 lakhs due to fall in the market or any such situation. Thus, only at that point you would need to invest for the shortfall amount. However, this can to some extent be avoided by simply re-investing the surplus in ELSS itself. The above illustration is valid if your 100 per cent (Rs. 1.5 lakhs) investment is in ELSS. Also, it is to be noted that all the above-mentioned funds are in no means any recommendations. These funds are taken just for understanding purpose.