MF Query Board

On social media, several financial influencers have emerged to offer investment-related advice, provide training, and market courses. How can we (I) shield from such individuals, and what guidelines should we follow? - Namrata Wagle 

At present, there are no strict regulations governing 'financial influencers.' However, the Securities and Exchange Board of India (SEBI), the market regulator, is in the process of developing measures to regulate these influencers, intending to make them responsible for the advice and promises they make 

In a recent move, the Advertising Standards Council of India (ASCI) has instructed financial influencers (finfluencers) in the banking, financial services, and insurance (BFSI) sector to obtain registration with SEBI and to prominently display their registration number in their social media advertisements. They are also required to reveal any certifications they hold. 

This directive from ASCI is quite recent and might need some time to be fully implemented. For the time being, the most prudent approach is to protect oneself by steering clear of these finfluencers and ignoring their advice. It's crucial to distinguish between financial guidance and mere entertainment. On platforms like Facebook, Instagram and YouTube, it's common to come across influencers who engagingly present financial information, making claims about market trends and suggesting that trading in certain stocks could generate significant wealth. 

The fundamental principle to remember is that if something seems too good to be true, it likely is. If influencers promise quick riches and claim to help achieve such wealth, it's important to critically assess these claims and wonder why they aren't amassing that wealth themselves. When evaluating financial advice, the advisor's background and expertise are critical factors to consider. 

Many perceive the stock market as a quick path to success, believing in secret 'strategies' that can unlock financial victory. However, investing in stocks or mutual funds is not about shortcuts; it involves earning, saving, and investing wisely and consistently. 

If you encounter influencers promoting fraudulent schemes or providing advice without proper disclosures, consider reporting them to the relevant social media platform or regulatory bodies. The more you know about personal finance and investment principles, the better equipped you'll be to evaluate the advice you come across. Consider taking courses from accredited institutions or reading books by reputable finance experts. 

I have found myself in a catch-22 situation regarding ELSS Funds and need your advice. Is it possible to transfer my investment from an ELSS to a non-ELSS fund? - Karthik Parmeswaran 

No. Transferring your investment from an ELSS (EquityLinked Savings Scheme), which has a three-year lock-in period, to a non-ELSS fund is not feasible until the lock-in period concludes. The process of reallocating funds from one mutual fund scheme to another within the same asset management company (AMC) is known as 'switching.' 

This process permits the movement of investments between different schemes under the same AMC without necessitating the transfer of money back to your bank account. However, since ELSS funds are subject to a lock-in period that prohibits early redemptions, you cannot switch to another scheme until this period expires. 

ELSS funds offer tax benefits under Section 80C of the Income Tax Act. To claim these benefits, you need to stay invested in the fund for at least three years. If you withdraw your money before the lock-in period, you will lose the tax benefits and may also face exit loads depending on the fund's policy. ELSS funds are locked-in investments. This means you cannot redeem your units before the lock-in period ends, except in certain specific situations like the death of the investor. 

Few alternative options you might consider:
1. Wait for the lock-in period to end — Once the three years are complete, you can redeem your units in the ELSS fund and then invest the proceeds in a non-ELSS fund of your choice.
2. Start a new SIP in a non-ELSS fund — You can continue your existing SIP in the ELSS fund while starting a new SIP in a non-ELSS fund. This allows you to benefit from the tax benefits of the ELSS and invest in another fund for different needs.
3. Consider other tax-saving options — If your primary goal is to save taxes, you can explore other options like PPF, NPS, or tax-saving fixed deposits. These options offer guaranteed returns but have lower liquidity compared to ELSS funds. 

It's important to remember that switching investments should be based on your financial goals and risk tolerance, not just for tax benefits. Before making any decisions, consider consulting a financial advisor who can understand your individual situation and recommend suitable options.