Dont Just Consider Taxes When Buying Tax-Deferred Funds! Three Key Things to Know Beyond Past Returns
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The tax deduction season is entering its final phase, with many investors looking for Thai ESG and RMF funds to fully utilize tax benefits. However, this year's challenge is not just the deadline but making decisions amid a wide and complex range of fund choices.
It must be said that investing for tax deductions is not merely about "taxes" but about the "future," which requires sound financial planning. Currently, there are many diverse tax-deferred funds available, making the hardest question each year still "Which fund should I choose?"
/* No content to translate */ Pi Securities Public Company Limited has revealed the correct principles for choosing tax-deferred funds to help investors manage taxes and build their investment portfolios simultaneously, including presenting a list of standout funds covering all investment styles.
Investing for tax deductions is not just about "taxes".
Krit Khomin, CFA, Head of Wealth Product & Investment Strategy at Pi Securities Public Company Limited, said that there are many types of tax-deferred funds available, including bond funds, mixed funds, and equity funds, both domestic and international. Yet, the hardest question each year remains the same: "Which fund should I choose?" Many people focus first on past returns, which is not wrong.
However, equally important is whether the fund "suits us" in terms of risk tolerance, holding period, and our own financial goals.
Investing in tax-deferred funds should not be viewed solely for tax benefits but as part of a long-term financial planning strategy, especially RMF funds designed for retirement.
Therefore, selection should be careful and aligned with one's life goals. For high-net-worth investors with high tax bases, the final phase of 2025 allows planning to use tax deduction rights totaling up to 800,000 baht, which is a good opportunity to manage taxes while building a long-term investment portfolio.
"Although there are many funds to choose from, understanding the correct selection principles makes decision-making easier. Choosing the right fund helps investors hold the fund long-term without excessive worry and increases the chances of achieving good returns as planned," Krit said.
Three criteria for choosing tax-deferred funds.
The key criteria for selecting tax-deferred funds are summarized into three main points investors should focus on:
1. Acceptable risk level.
Investors should first assess how much volatility they can tolerate since each fund type has different risk characteristics.
- If the risk tolerance is relatively low, bond-focused funds such as government bonds, high-quality debentures, or deposits are more suitable as they have less volatility and help preserve principal.
- But if one can tolerate higher risk and seeks long-term growth opportunities, equity-focused funds or assets with high growth potential may be better options, despite the increased volatility.
2. Investment duration and tax conditions.
Krit explained that tax-deferred funds have different holding period requirements. Thai ESG Funds require holding for at least 5 calendar years, a shorter period than RMF, making them suitable for those seeking tax deductions but wanting financial flexibility. RMF funds require holding until the age of 55 and continuous investment for at least 5 years, fitting for serious retirement savers.
"The key point is to be sure the holding period matches your goals before deciding, or else you might face restrictions that affect your financial planning."
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3. Fund investment policy.
The investment policy shows what the fund invests your money in, directly impacting future risk and returns. Investors should consider whether the fund focuses on certain asset types.
These include bond instruments suitable for those prioritizing principal stability, equities for those seeking investment growth, and mixed funds for those wanting a balance of stability and growth.
List of 7 funds covering all investment styles.
Additionally, Pi Securities has selected seven potential funds covering bonds, mixed funds, Thai and international equities, and Thai ESG funds to offer investors options for tax deductions and long-term portfolio growth aligned with individual risk profiles, including:
Thai ESG Funds
- KKP GB THAI ESG or KKP Thai Government Bond for Sustainability Fund
- A best-in-class government bond fund for investors wanting tax deductions while maintaining portfolio stability. It has lower risk compared to other fund types. Its strength lies in relatively consistent returns, though short-term fluctuations over 1-3 months may occur due to interest rate pressures, but overall it is steadier than other asset investments.
- A mixed fund focusing on bonds and 30% Thai equities. It balances growth opportunities with volatility management, delivering more stability than pure equity funds in volatile markets while strategically offering higher returns than pure bond funds over the medium to long term.
- This fund invests in large-cap Thai stocks with stable business bases and strong ESG standards. It is more equity-exposed than mixed funds, capable of good returns during market uptrends but with higher short-term volatility.
RMF Funds
- K-FIRMF or K Retirement Bond Fund
- A core fund for retirement portfolios emphasizing long-term stability. It is a bond-based RMF designed as a solid foundation for long-term portfolios, especially for low-risk investors seeking steady retirement growth, investing diversifiedly in high-quality domestic bonds including government bonds and highly rated corporate debentures, providing consistent returns.
- A global income fund option for steady income in retirement portfolios. It focuses on stable income through worldwide bond investments, managed via the PIMCO GIS Income Fund, a top global bond expert, enhancing portfolio stability, diversifying outside the Thai market, and aiming for consistent income.
- A global quality RMF aiming for long-term retirement portfolio growth. It invests in high-quality global stocks through the Wellington Global Quality Growth Fund, a renowned asset manager with extensive experience and a 5-star Morningstar rating, carefully selecting companies with strong earnings growth and potential for future returns.
- A global growth RMF for long-term retirement portfolio growth. This 5-star Morningstar-rated foreign equity RMF invests in world-class companies expected to be long-term winners with high growth potential, such as new technology, healthcare, innovation, and businesses transforming the global economy, managed by Baillie Gifford Worldwide Long Term Global Growth Fund, a top manager known for selecting quality growth stocks.
Krit added that investors should start tax planning and gradually purchase tax-deferred funds early rather than waiting until the year's end, as missing the deadline means losing this year's tax benefits. RMF and Thai ESG funds can be purchased until 30 December 2025.
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