Hi,
I am looking at ways to maximise returns from my trading capital. I trade in FnO. It seems to me that its better to allocate 50% capital to buy debt funds and the remaining 50% to buy liquidbees. Then pledge both and use that for FnO trading.
I would like to know the cons of this strategy, if any. Also please advice if there are smarter ways to create additional return on trading capital.
Regards,
AB
Debt mutual funds also works in cycles, so study different types before investing. You may invest 100% of it , there are mutual funds which are termed as cash collateral. Return wise and liquidity wise they are better than liquid bess as you have options to diversify
There is requirement of 50% cash and 50% equity for margin. So, you can buy equity stocks/MF to maximize returns.
Just to add this requirement is only for overnight position. If you are planning to square off intraday then this 50 50 does not apply to you
My research points me to 50% corporate bond fund (direct, growth) and the remaining 50% in liquid funds. I would like to take moderate risk on the non-cash component, expecting returns atleast that of FD.
I am completely in the dark regarding the tax implications.
I would really appreciate if anybody could shed some light on the tax implications. Also please advice on my fund selection. Is there anything else that I should be wary of?
Thanks for all your support,
AB
Corporate bond funds will be taxed as Debt funds - if sold within 3 years from the date of investment, entire amount of gain is added to the investors’ income and taxed according to the applicable slab rate.
From taxation/risk/returns, balanced funds are better suited for the non-cash component.
For the cash component, you can break your investments in 3 buckets of Liquid fund, Money manager fund and Gilt Funds. Liquid fund returns are less and have less fluctuation (can be liquidated easily - next day). Money manager to get slightly better returns. Gilt funds if you expect the interest rate to go further down in the long run.
For 10 lakhs of cash component, invest 3 Lakhs in liquid, 3 lakhs in money manager, 3 lakhs in gilt and the remaining 1 lakh as cash.
Another option, when you are not going for Gilt funds is to buy SGB. It also provides interest of 2.5% and the returns will be market based. Some of the listed SGB are available at discount.