THERE IS ONLY one month left to invest in LTF and RMF funds, the two popular long-term investment choices for retirement wealth creation with tax-saving privilege. Speaking of LTF & RMF, most first-time investors still primarily think of investing to reduce taxes. Indeed, there are many factors that first-timers should be aware of before investing by the year-end.
First, investors should be aware of the time horizon of long-term investment. The letter 'L' in LTF stands for 'Long' Term Equity Fund, and the 'R' in RMF stands for 'Retirement' Mutual Fund.
With an RMF you cannot cash out until you are 55 years old at the earliest, and the holding period of the fund must be at least five years from the first day of purchase. (Please note that the 5-year count will be counted only for the year that RMF is purchased.)
As for LTF, you cannot redeem it before the seventh calendar year. Hence, you should assure that you are ready for these long-term investment conditions. Keep in mind that the wrong condition redemption means you have to reimburse your tax deduction with the fare.
Second, calculate your annual revenue and your right to invest in LTF&RMF before investing. Normally, the maximum investment in an LTF is 15 per cent of a person's gross income but not more than Bt500,000.
For RMF, the minimum deductible rate is 3 per cent of the total personal income a year or not less than Bt3,000, whichever is lower, while the maximum is 15 per cent but not more than Bt500,000.
If you pay into a provident fund or the Government Pension Fund (GPF) at work, then the combined amount of tax deducted for RMF and the provident fund or GPF is a maximum of Bt500,000 a year.
Third, fund selection is another important factor,. Both the LTF and the RMF now have a variety of investment policies. Don’t forget to thoroughly study the fund investment policies and the relevant investment risk.
Concerning LTF, though mainly focused on high exposure in Thai equity, there are quite a wide variety in terms of dividend policy and equity selection, for example, some may focus on small-mid cap equity, large cap equity, growth stocks, value stocks etc.
For RMF, investors can enjoy many choices of assets including Thai equity, global equity, global balanced, fixed income, government bond, as well as gold and property.
It may also expand to thematic fund such as Robotics and AI theme.
Choosing the fund that matchs your risk level and your long-term investment goal is a must.
Last but not least, the portfolio diversification should not be overlooked.
Purchasing funds from several fund houses does not mean that you have already diversified your portfolio if each of them has the same investment style.
Investing in the same group of shares means that all funds are risky. Therefore, you should diversify your LTF-RMF portfolio into a wide range of asset risks.
Another important factor you should not forget is “timing”. It would be very good if you always purchase at the right time.
Monitoring the market is a must, but if you cannot keep your eyes on the market around the clock, please let Dollar Cost Averaging (DCA) be your solutions.
Investment entails risk. Investors should thoroughly study fund features, return condition, investment risk and study LTF-RMF investment manual before investing in LTF-RMF.
Contributed by Asset Plus Fund Management