Explanation: Markets are up, should you be taking profits now? Where should you put your money?

As the haze around the US election result began to lift Thursday morning, the benchmark Sensex at BSE and Nifty at NSE jumped 1.8% and approached their respective historic highs levels seen in January of this year. The Sensex closed at 41,340, just 604 points or 1.4% lower than its all-time close of 41,945 on January 17, while the Nifty closed at 12,120, just 2% from its close of 12. 362 on January 14.

So should you book profits right now?

Amid a new wave of Covid-19 infections around the world and a looming threat of lockdown, investors would do well to book profits on their investments when the market is up. With a vaccine still a long way off, uncertainty remains over the global economy. Several countries in Europe have imposed new containment measures in the face of the increase in the number of new cases and deaths. Bearing in mind that further containment measures may harm the economic recovery and the evolution of stock markets, it would not be a bad idea to book profits on investments that have reached their targeted growth.

Some profit booking also makes sense at this time, as many believe that if Covid-19 concerns persist for an extended period, investors will have the opportunity to invest in the same assets at a cheaper valuation at a later date.

It should always be remembered that while investments are to be made in a regular and disciplined manner, the redemption or reservation of profits should be planned and executed when the markets are rising or the expected gains have been made.

When the Sensex fell more than 35% from January highs to 25,981 on March 23, there was a sense of anxiety among investors. Many lamented that they missed out on making profits and reducing their equity exposure when indices traded at record highs in January. Nobody knew that the market would return to its levels in 10 months and offer the same opportunity again. Now that this has happened, investors would be wise to reserve and hold some profits aside, to reinvest in the event of a downturn. 📣 Express Explained is now on Telegram

Where should you count profits from?

It is important to note that while direct investments in stocks of various companies may have generated good positive returns, a number of SIP investments in mutual funds may not have generated sufficiently large positive returns. for investors to book profits over the past 3-5 years. Therefore, experts say it may be better to book profits from individual stock investments rather than mutual funds. The decision to withdraw from mutual funds, however, may depend on the age of the investor, the investment period and whether or not the investment objective has been achieved.

Some believe investors should look for companies that aren’t performing too well during the pandemic period but have seen a significant rise in stock prices, to make a profit.

“As the second quarter results come out, investors can identify companies that are tight on the trading front but have seen strong increases in their share prices. I think investors should take profits in these companies because they will have the opportunity to buy them at a later date and at a cheaper valuation,” said CJ George, MD, Geojit Financial Services. constraints of the last six months, because they would do well in the future.

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What should mutual fund investors do?

The strategy should depend on the life cycle of an investor. If the investor is young, say in their 30s or early 40s, they can stay invested for the long term and let short-term volatility play out. But for an investor in their late 50s and nearing retirement, it’s important to seek out that opportunity and reduce their exposure to equities and start deploying funds in safe asset classes where they don’t there is no risk of capital erosion.

“Now is a good time for investors to rebalance their portfolios. Investors who think they have high exposure to equities can reduce it and switch to debt,” said Surya Bhatia, founder of Asset Managers, a financial advisory firm.

Where should you put your money?

Even if one delivers profits, the most important aspect in these times is where to deploy that money. Investors can consider various options. The first is to keep the cash in cash and place it in fixed bank deposits, G-Secs or a mutual fund system for a period of three months to six months, and deploy it in companies top notch high quality when there is a dip in the market.

The other option is to look for high performing companies in sectors that are still trading significantly below their pre-Covid levels in January 2020. A fund manager at a leading fund house said investors can turn to strong private sector banks or a banking sector. funds, and may also seek to invest in dividend yield funds or special situations funds.

Will there be a long-term capital gains tax?

In his February 1, 2018 budget announcement, then Finance Minister Arun Jaitley announced a proposal to impose a long-term capital gains tax of 10% (without indexation) on gains greater than Rs 1 lakh from the sale of listed shares or equity units. oriented mutual funds. However, the government has said that all winnings up to January 31, 2018 will be grandfathered and not taxed.

So, if investors record profits with capital gains exceeding Rs 1 lakh (as of Feb 1, 2018), they should be prepared to pay LTCG tax at the rate of 10% on all gains exceeding Rs 1 lakh.

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