The LTF fund has been cancelled since 2019. If we have an LTF fund and some of it is about to expire in 2020, what should we do?
Before making a decision, let’s understand the issue of the LTF fund being cancelled. What are the impacts?
“LTF funds will only receive tax deductions until 2019.”
I believe that many people, upon learning about this, working people who hold LTF funds, will be worried and will have many questions, such as: Does the cancellation of LTF funds mean that the fund will be closed? What will happen to the money in the fund? Is this the last year? Should I buy it? And what will replace the LTF fund?
So don’t panic or worry. Let’s find out what the future holds for the original LTF fund.
“For the tax deduction rights of the LTF fund, it will expire this year, but the LTF fund has not been canceled.”
The LTF fund still exists. It has not been closed or cancelled as many people think. The fund management company (AMC) still has the duty to manage the fund and provide services to us as usual.
“What will happen to the LTF funds that you hold? And for those who already bought in 2019, what should you do?”
If we hold LTF funds that have not yet met the conditions or purchase more funds in 2019, we still have to hold them until the maturity date (7 calendar years) according to the original tax deduction conditions of LTF funds.
In particular, 2019 was another year when the Thai stock market was volatile. But overall, it was still considered to provide better returns than 2018. In the case of those who buy using DCA or invest by averaging the cost every month, from statistics, there is a better chance of making a profit than those who buy only once or in one round. And it is the last year of tax deductions for LTF funds, so it is a good year to invest in LTF.
The advantage is that we will hold it for only 7 calendar years and will get a full tax deduction (LTF deduction limit of 500,000 is separate from other tax deduction funds).
“LTF funds that I hold have matured. Are they still for sale?”
First, we need to understand the stock market situation. In 2019, the SET Index was running at 1,500-1,600, and sometimes it even went up to 1,700. However, after the COVID situation, the SET Index fell sharply, almost 1,000 points in March 2020. Now, it is still going up and down, with no sign of going back to the way it was. So what should we do?
If we hold it for 7 calendar years, we have the following options:
“Sell” if there are better investment options, such as reinvesting in other funds that have tax deduction benefits in the following year, or investing in other assets, or keeping them in fixed deposits or savings to find a good time to invest, etc.
“Continue holding” There are many working people who, after the LTF fund they hold has matured, continue to hold it because they are satisfied with the returns they have received, whether in terms of dividends or profits from the increase in the value of the investment units.
But as you know, the stock market situation this year has been severely adjusted downward. It may be necessary to hold on to it first and wait for the opportunity to sell in the future.
However, whichever option you choose depends on your own investment goals and objectives.
“The LTF fund that I hold has matured. If I continue to hold it, will it fall or cause me to lose money?
Many working people are worried that the LTF funds they hold will be redeemed in large amounts each year when they reach maturity, which is feared to cause the value of the investment units to fall and may affect the stock market.
Starting from the unit value, the net asset value of the fund depends on the assets that the fund invests in. Therefore, the unit value will not decrease from the sale of LTF funds each year.
Next, let’s look at the impact on the Thai stock market?
“The impact may not be as severe as expected,” because the total investment in LTF funds is only about 2.5% of the market cap.
“What if we buy LTF funds after 2019?”
Yes, some LTF funds offer interesting returns. If we want to invest, we can do so like general mutual funds. We will receive dividends (if the LTF fund has a dividend payment policy) or we will profit from the price difference (if the unit value on the day we buy (cost) is less than the unit value on the day we sell (income)). This profit difference will be exempted from tax. But the important thing is that “we will not be entitled to tax deductions.
Summary for LTF Fund
The tax deduction is only available within 2019. The new fund that will replace it and will receive the tax deduction is the Super Saving Fund (SSF) (starting from 2020). The LTF fund will be held until it is sold and held for 7 calendar years.
Even though the LTF fund has been cancelled, you can still choose to buy more in 2020, but you will not receive a tax deduction.
No matter which fund is released, every investment still has risks. However, the level of risk may vary depending on the type and nature of the fund. The higher the return, the higher the risk. This is in line with the concept of high risk, high return.
Therefore, we need to understand it well, look at ourselves to see how much risk we can accept, what our investment objectives are, and look at the investment policy, risks, conditions, and benefits for our own maximum benefit.
