@mgreene05 It's still passive. You are still investing in an index and not choosing the stocks yourself. Passive investing does not mean you don't buy the dip.
Passive investing: ETF vs Mutual Funds. Do we have a new winner? (Data backed research)
- Thread starter shammysdad
- Start date
gracedaily
New member
@shammysdad Let us say for the sake of argument that ETFs are slightly better. Do they help with meeting Section 80C limit? I keep filling 1.5L limit with ELSS mutual fund schemes. I’m not aware of any ETFs that help with tax benefits?
@shammysdad Pick one and stick to it is what I usually say. Gains and loses are in paper until you actually realise them.
Just my $0.02
Just my $0.02
shammysdad
New member
@shammysdad Anyone. You don't have to find the perfect one. Being consistent and time in the market is key. Usually all this research leads to analysis paralysis and ends up going with whatever they preferred initially.
scrupulous
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scrupulous
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andrewofthetribe
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@shammysdad Sorry, you mean pick which ETF?
sayjay9274
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@shammysdad ETFs are more tax efficient.
cordlessvacuumcleaner
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@sayjay9274 In what way?
sayjay9274
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@cordlessvacuumcleaner See the way capital gain taxes are calculated in ETFs vs MFs - https://www.nerdwallet.com/article/investing/etf-vs-index-fund-compare
cordlessvacuumcleaner
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@sayjay9274 That's US taxation, not Indian
sayjay9274
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@cordlessvacuumcleaner Can you elaborate on what's different?
Isn't the following applicable to ETF/MF in India -
"ETFs are more tax efficient than index funds by nature, thanks to the way they’re structured. When you sell an ETF, you’re typically selling it to another investor who’s buying it, and the cash is coming directly from them. Capital gains taxes on that sale are yours and yours alone to pay.
To get cash out of an index fund, you technically must redeem it from the fund manager, who will then have to sell securities to generate the cash to pay to you. When this sale is for a gain, the net gains are passed on to every investor with shares in the fund, meaning you could owe capital gains taxes without ever selling a single share."
Isn't the following applicable to ETF/MF in India -
"ETFs are more tax efficient than index funds by nature, thanks to the way they’re structured. When you sell an ETF, you’re typically selling it to another investor who’s buying it, and the cash is coming directly from them. Capital gains taxes on that sale are yours and yours alone to pay.
To get cash out of an index fund, you technically must redeem it from the fund manager, who will then have to sell securities to generate the cash to pay to you. When this sale is for a gain, the net gains are passed on to every investor with shares in the fund, meaning you could owe capital gains taxes without ever selling a single share."
cordlessvacuumcleaner
New member
@sayjay9274
This is the bit that doesn't apply. Indian MF are structured in a better way than US funds in some aspects. The chief of them being no capital gains distributions. If a US fund sells a stock and has capital gains on said stock sale then it needs to be passed on to the investors as capital gains distributions, usually at the end of the year, realising these gains in the investors hands. Meanwhile, over in India, a growth based fund can have 100% gains by selling a stock, the investors (or the fund) pays 0 taxes unless the investor in question withdraws money from the fund in which case the investor and said investor alone pays a tax. No one else, not the fund, not other investors.
This is the bit that doesn't apply. Indian MF are structured in a better way than US funds in some aspects. The chief of them being no capital gains distributions. If a US fund sells a stock and has capital gains on said stock sale then it needs to be passed on to the investors as capital gains distributions, usually at the end of the year, realising these gains in the investors hands. Meanwhile, over in India, a growth based fund can have 100% gains by selling a stock, the investors (or the fund) pays 0 taxes unless the investor in question withdraws money from the fund in which case the investor and said investor alone pays a tax. No one else, not the fund, not other investors.
zashmaster
New member
@cordlessvacuumcleaner I admire your patience in explaining this. Frankly, I would not have taken the effort. The sub name is clear, and there is no point in trying to explain the structure of Indian mutual funds to people who seem to think only in US terms.
seeker1231
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@cordlessvacuumcleaner You only pay tax when you sell them. No tax if you buy and hold them forever. Best is to buy growth ETF. So money keep growing tax free. If income low you may never pay tax even if you sell the ETF.
cordlessvacuumcleaner
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@seeker1231 That's the same case for Growth MFs too
seeker1231
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@cordlessvacuumcleaner You can buy ETF like you buy a stock which you cannot do with mutual fund and some of the mutual fund companies are not true mutual. In US only Vanguard true mutual as Vanguard Mutual Fund holders own Vanguard hence their low fees. Rivals Fidelity, iShares etc publicly listed companies so they have higher fees.
cordlessvacuumcleaner
New member
@seeker1231 We're in India, absolutely no fund is mutual here by Vanguard's definition. This is r/IndiaInvestments, unless specified mutual funds refer to the Indian mutual fund industry which operates in a completely different manner to US Mutual funds. In fact accumulating funds are not a thing in the USA
gracedaily
New member
@sayjay9274 Really. Do any of the ETFs help with 80C?