I started investing in mutual funds four years ago. My risk profile is aggressive and my goal is having a retirement corpus in 15 years. I’ve invested in Axis LT equity ( 1.25 lakh), ICICI Pru long term equity ( 40,000), Reliance Tax Saver ( 65,000), DSP Tax Saver ( 40,000), Mirae Asset India ( 60,000), Kotak Standard ( 35,000), and 25, 000 each in HDFC Midcap , Franklin Small Cap and Motilal Oswal Multicap. The total comes to around 5 lakh. These were regular funds that I have stopped and started investing in direct funds—Mirae Tax Saver ( 10,000), Kotak Standard ( 5,000), Motilal Oswal Multicap ( 35,000), Reliance Small Cap ( 3,000), L& T Emerging ( 5,000) and Invesco Contra ( 5,000). I am planning to convert regular funds into direct once the 1-year ELSS lock-in period is over. Since the amount I’ve invested in regular funds is around 5 lakh, what’s the best way to convert into direct?

—Balaji Koneti

Converting funds from regular plans to direct plans can be done quite easily. You would simply need to issue a “switch" instruction to move the units from regular plan to its direct equivalent. Please remember to mention the word “direct" along with the name of the target scheme for the switch if you are filling out a paper form. If you are doing it online, remember to select the “direct" version of the scheme as your “to" fund. There are a couple of things to remember, however. You have mentioned that ELSS funds have a 1-year lock-in period. Please note that ELSS funds have a 3-year lock-in. If you meant to say that there is one more year left in the lock-in period, then that’s fine. Also, when you make a switch such as this from regular to direct, it is the equivalent of selling regular funds’ units and buying direct funds’ units. That means exit loads will be applicable; although considering that you have invested for four years now, it is unlikely that there is any. You will need to pay capital gains taxes on your redemption proceeds as applicable as a consequence of the switch. When you make these switches, they will complete in 3-4 days and your units will all be in direct mode after that.

Srikanth Meenakshi is co-founder and COO, FundsIndia.com. Queries and views at mintmoney@livemint.com

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