Coffee can investing.
Buy something good and do not touch it for ten years. Against switching every few months, holding pays tax once instead of every time, so more of the money keeps compounding.
The other way, I switch every
Brokerage, exit load, the spread. Funds with an exit load charge about 1% inside a year.
The answer
Leave it alone.
Holding ends with ₹4.8 L more after tax, from the same return. Switching 10 times paid ₹3.8 L in tax along the way and ₹84,853 in costs, money that stopped compounding.
Hold
Better₹28.3 L
- Before tax
- ₹31.1 L
- Tax paid
- Once, at the end
Switch
₹23.6 L
- Tax along the way
- ₹3.8 L
- Costs
- ₹84,853
How it is decided
What each leaves you after 10 years and tax
- HoldAhead₹28,32,088Tax once, at the end
- Switch every year₹23,55,229₹3.8 L tax and ₹84,853 costs on the way
What this assumes
The same return either way, so the only difference is tax and costs. Switching within a year is short-term at 20%, after that 12.5%, both plus cess. Leaves out the ₹1.25 lakh yearly exemption, which is shared with everything else you sell.
Rules and rates from
- Income Tax Department (opens in a new tab)
- AMFI (mutual fund investor education) (opens in a new tab)
Education only, not investment, tax or legal advice. I am not a SEBI-registered investment adviser.
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