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Q. What are the ways in which I can invest in India in the name of my minor granddaughter who lives in the U.S. and is an American citizen by birth.A. The investment options for U.S./Canada NRIs per se are limited. And, it gets more complex with the person being a U.S. citizen. First, for any investment that is permitted, be it a deposit or policy, your U.S.-citizen-granddaughter needs to have an OCI (Overseas Citizenship of India).Even with that, many options are closed to NRIs and more specifically U.S./Canada NRIs. For example, most mutual funds do not offer schemes for U.S./Canada residents as the respective regulatory authorities abroad require local firms to report to them on such investments by their residents. Similarly, Post Office deposits are not available for NRIs.While there may be insurance policies available, such child policies are best avoided as either their cost structure can be poor, or they would be market-linked and would require you to track the performance. Stocks are permitted but it is best not done in a minor’s name.Unless your granddaughter has any plans to come to India or shift her citizenship, it is best that you do not invest in the name of the minor. Instead, you can choose any of the following options: one, you can simply continue investing in a mix of FDs and mutual funds (if you are familiar) in your name and add her as a beneficiary for some of these investments. Two, spell out in a simple Will, what you would like to leave for her. Three, you can simply do an international money transfer for her education as and when needed, as a gift. You can do $2.5 lakh per financial year. Please consult your auditor for any tax implications.Q. I have a fund with over ₹6 lakh in value. Looking back, it was a poor investment choice. It had an SIP of ₹5,000 which I cancelled. This fund is about 30% of my portfolio. I want to switch this amount to another fund from a different fund house.I understand that I would have to redeem the amount first to invest. Should I redeem the entire amount or do an SWP? I am asking this question for tax purposes as the corpus is large. And, once redeemed, should I invest the entire amount through lump sum or do a STP from a debt fund?A. Yes, you need to redeem fully and reinvest. Once you realise your fund is a poor performer, there is no point removing it systematically, unless the amount is exceptionally large.Please consult your auditor on the tax impact and exit in one shot. Given that equity gains of up to ₹1 lakh are free of tax and your fund’s performance has anyway been mediocre, you are unlikely to see large gains as the market itself has not delivered much in the past 5-10 years.Generally, when you move from one equity fund to another, there is no timing risk. You remain invested in equity as an asset class — just that you move to another fund. However, most investors worry that reinvesting a lump sum in the new fund in one shot may result in losses if the market is at a peak. Again, technically it doesn’t as you need to consider your original entry as the point of investment in equity. Hence, we leave it to the investors to make the choice.If this timing issue worries you, exit in one shot and use an STP (from a liquid fund and no other category) to invest in 12-18 months. Else, move in one shot and top it up immediately with monthly SIPs to ensure you average, in case markets fall after your new investment.(The author is co-founder, Primeinvestor.in)
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