Hello all, I have a query related to the way taxation works as a mutual fund, vs a person copying the same rebalancing
Assuming that over the year it has many rebalancing done, I assume as an individual, one has to pay LTGC / STGC based on the net gains and duration of holding
My question is if its done by mutual fund, why such taxes aren’t applicable?
How can retail people work like a mutual fund and only pay taxes when Units are completely redeemed?
it is because, Mutual fund is not end user. Investor is,
Tax is calculated when investor redeems units. This tax is exactly similar to what investor would have been taxed for profit (or loss) form his similar value stock profit (or loss).
Yeah I understand, the point is I want to rebalance according to my wish (not withdraw to bank account) stay invested but prevent paying CG Taxes
One of the many use case - Say a mutual fund A has 50 stocks, I’m only interested in 40 of them. So I invest in the 40 and then mimic the fund house
I don’t want to invest in the other 10 stocks picked by the fund house because they are stupid investments in my view
Nothing can be done.
Either you trust MF, invest with them and get relevant tax benefits during rebalance / dividends.
OR you don’t trust fund manager, invest in direct equity, and pay tax as direct equity investor.
Unfortunately there is no way to get best of both worlds.
oh… means take it lighlty
Establishing Mutual fund is complex task with lot many regulatory restrictions.
will give you some idea what it takes to establish fund
The fund managers and their research teams do hard work while selecting stocks. Above might be a stretched comment. if they can do their job well for 40 stocks, the same can be true for remaining 10.
Also from your point of view , if someone is picking up obviously bad 10 stocks, what inspires confidence that rest 40 are excellent ?
In my humble opinion , you may like to re-evaluate your strategy.