Investing: Rishi Nathany

I am 45, earning about Rs 65,000 monthly. I have been investing in mutual funds for the past nine years (equity-diversified funds with a growth option). Should I switch over to the dividend option? The volatility in the market is making me nervous.

Since you have been investing in the markets through the systematic investment plan (SIP) route for nine years, you must have seen a lot of volatility in this period, especially in the crash of 2008. As a long-term investor, if you did not get worried at that time, why get nervous now? The markets, by nature, are volatile. However, historically, long-term investors have seen decent returns on their investments in equity markets.

More, how will switching from the growth option to the dividend option help you? Both dividend and long-term capital gains are tax-free. Assuming you want to opt for a dividend payout, what would be the benefit of receiving back your investments from the fund house in the form of dividend while, at the same time, investing more money every month through SIP? More, many fund houses may not announce dividends on their equity schemes due to the current market conditions. Therefore, I suggest you stay with your SIP growth option for now.

A few stocks were recently ousted from the futures & options (F&O) segment by the National Stock Exchange. I hold a futures contract for one of the scrips. Given the choppiness in the markets, I am worried I will incur heavy losses. How can I minimise these?

The exchange will allow stocks being removed from the F&O segment to continue trading till the expiry date of the entire period for which contracts are already open. Only new contracts will not be added.

In case you are not able to square your trade profitably within this period, and yet want to hold on to your position, the only option for you would be to take delivery and simultaneously square your position in the F&O segment (assuming you have a long position in futures). Thereafter, this can stay as an investment till you get your desired price. On the other hand, if you feel the markets may react adversely to your trade, you may square off while it is still being traded in the F&O segment.

The writer is CEO, Dalmia Securities