Monday, March 8, 2010

BEST TAX SAVING FUNDS


Investing in Equity Linked Savings Scheme is the best way of saving tax, as it achieves the twin benefit of Tax Savings and providing benefits of Long Term Equity Investment. http://goodfundsadvisor.blogspot.com/2009/12/saving-taxes-elss-is-best-option.html

I keep getting hundreds of emails requesting me to recommend me the BEST ELSS fund. It is practically impossible to answer and satisfy each of them. http://goodfundsadvisor.blogspot.com/2009/12/saving-taxes-elss-is-best-option.html

So, I decided to write my best picks and post them on my blog here. I hope this will help you.

RECOMMENDED ELSS FUNDS :

Religare Tax Plan

An open-ended Equity Linked Savings Scheme (ELSS) with a lock-in period of 3 years, seeks to generate long term capital growth from a diversified portfolio of predominantly equity and equity related securities. Its performance has been in the top quartile in the recent past. The scheme has generated a 1 year CAGR of 114.85% while the benchmark indices ‘BSE 100’ rose by 109% during the same period. The fund has outperformed its benchmark in 3 years, 2 years and 1 year period. Even in its short history, the fund has developed the good habit of liberal Dividend payout.

Birla Sunlife Tax Relief 96 Fund :

Has been a STAR performer since its launch. The Fund has been ranked THE WORLD'S BEST FUND by Lipper!!!!

The Fund has had a great Dividend History. Your Rs.1 Lakh investment in this Fund in 1996 would have yielded Rs.21 Lakhs by way of Dividend alone!!! (Add another 70% being paid out on 12th March). Has given an astonishing return of 32.69% CAGR since launch in March 1996.

Sundaram Tax Saver:

Has a portfolio with a mix of Large Cap and Mid cap and is this a bit more volatile than the rest. The Fund is actively managed and is very nimble and thus performed well in the Bear Market of 2008. Its High Sharpe Ratio shows that the Fund's active asset allocation has paid dividends.

HDFC Tax Saver :

The BEST ELSS Fund. Not only does the fund do well in a Bull Market but amazingly even protects your money better in a Down market. Steady and Convincing Long Term Track Record makes this a Must Have even for Non-Taxing Purposes. The First Choice for any Tax Saver wanting an ELSS exposure. Even though the Fund has a large cap bias, it has managed to consistently beat its Benchmark, year after year. In Valueresearch rankings, The Fund has never had a rating of less than 4 Stars since more than 7 years now!!!!!

CanRobecco Equity Tax Saver :

Has had a remarkable turnaround in its forutnes since Robecco's entry. Earlier it showed flashes of brilliance, but that's it. Since 2006 has the fund consistently started outperforming its category and its benchmark. The Fund has a amazing knack of quickly moving into cash in times of market crash and being fully invested during bull runs which makes the Fund very volatile but has good performance to show for the volatility. Aggressive ELSS investors could consider this Fund.

Fidelity Tax Advantage :

The Fidelity Tax Advantage Fund has been a consistent performer since it was launched in 2006. It recently won the ICRA 7-Star Gold Award 2009 in the ELSS category for its 3 year performance till December 31, 2009. Its "value" approach makes it a good fund for all types of investors.

Also read http://goodfundsadvisor.blogspot.com/2009/03/suggest-me-good-tax-saving-funds.html

THOSE WHO DID NOT MAKE IT TO LIST :

There are some funds which have given good returns and you could see them recommended by some experts, but I refrained from recommending them. I have given the names and reason for NOT recommending them.

SBI Magnum Tax Gain :

Has had a power packed past, but has been struggling for the past two years. Frequent change in the Fund Manager has had its impact. The Fund has lately increased its exposure to Large Caps and is thus suited for low-risk investors. Its huge bloated Fund corpus could be a big drag on the performance.

Franklin India Tax Shield :

Has been a steady performer since its launch. The Fund's 'safety first' makes it suitable for conservative investors. Definitely not the most exciting ELSS Fund, but it protects your money well.

Taurus Tax Shield :

The Fund has had two very good years and should have straightaway made it to the list of recommended funds, but .....BUT its volatile past and relatively high exposure to mid-caps make this fund a High Risk High Return Fund and could be avoided.

Sahara Tax Gain :

Has been very impressive both in the short term as well as the long term. But its tiny AUM should be a cause for concern and you can avoid at this point till there is some semblence of inflows into the fund to give comfort in terms of AUM.

OPT FOR DIVIDEND PAYOUT :

Never go for Dividend Reinvestment Plan in ELSS because by this The Fund assumes you are making a Fresh investment whenver your Dividend is reinvested and thus is locked for a further period of 3 years. Either opt for Growth or Dividend Payout.

For HNIs and those having liquidity constraints, it is wise to opt for Dividend payout option. Even though, Mutual Funds dividends (unlike Equity Share dividends) give back your own money to you, here, since your money is locked for 3 years, it would be prudent to get back some part of your capital. It would also ensure that you get Full Tax benefits without investing the full amount of Rs.1Lakh.

Ex:- Suppose you invest Rs.1 Lakh in Birla Sunlife tax Relief96 whose NAV is 80, you get 1250 units. Now since dividend is announced at 70% (7 per unit), you get back, Rs.8750/-. So, in effect, on a investment of Rs.91250, you still manage to claim Tax Rebate of Rs.33990. This is just an example, some funds even have a dividend yield of above 10% and some Tax Funds (Religare, Sundaram) even declare dividends more than once in a Financial Year.

ELSS & SIP - A FANTASTIC COMBINATION

Best way to invest in ELSS is through Systematic Investment Plan(SIP). With SIP you can invest a small amount every month for a specific time period. With SIP investor can take advantage of fluctuations in the stock market. So investor will get more units when the market is down and get less units when the market is up.

Instead of simply putting in a chunk of Rs 1 lakh at the end of each fiscal year, if you develop a healthy saving habit,you could invest a fixed amount every month and benefit from the advantages of both SIPs and the tax rebate.

When you invest in ELSS, through the SIP route, you enjoy the multiple benefits of better market-linked returns in the long run, rupee cost averaging and a tax break. So, happy investing!

For the other articles on ELSS funds, click here http://goodfundsadvisor.blogspot.com/search/label/ELSS and get all the details.

Regards,

Srikanth Matrubai



Also visit

http://equityadvise.blogspot.com

6 comments:

  1. Now, that was a timely post, as now I can invest a lumpsum in BSL Tax Relief'96, and get some money back as dividend.

    Thanks,
    Vishal

    ReplyDelete
  2. Of course, you will get Dividend, if you invest before the Record Date of 12th march

    ReplyDelete
  3. Hi Srikanth,

    Thanks for including Religare Tax Plan in the list of best ELSS funds.

    To know more about Religare products, services,tips, news and views please go to www.facebook.com/Religare.Enterprises and www.twitter.com/religare_rel .

    We look forward to interacting with you!

    Regards,

    The Religare Customer Care Team

    ReplyDelete
  4. Hi Srikanth!
    It's Yogesh here, a 32 yr old scientist working with MNC. First of all, let me congratulate you for creating such an informative and unbiased blog. Thank you very much for your time, guidance and helping naive people like me to invest hard earned money in a beneficial way.
    My personal information:
    Married from 2yrs and 6 months, no children
    Take home Salary: Rs 68000/month
    Life Insurance Premium: Rs 18484/yr
    Health Insurance: Rs 7000/yr
    Rent: Rs. 15000/month
    To parents: Rs. 15000/month
    I don't have any loan, and do not own any property.

    I am planning to invest atleast Rs 10000/month. This is purely for investment (long/short) and not for tax saving purpose.
    I sincerely request your guidance in planning my investment.
    1. What should be the best investment/saving option? MF/ELSS/ULIP???
    2. If I opt for ELSS, which one should I go for? DO I need to buy ELSS though broker or can I directly call the AMC to buy units?
    3. Do you suggest any other option of investment/saving with better returns?
    I had be grateful to you if you could help me in this regard.
    Thanks in advance.
    Thanks & regards,
    Yogesh

    ReplyDelete
  5. Hi Srikanth!
    It's Yogi here, a 32 yr old scientist working with MNC. First of all, let me congratulate you for creating such an informative and unbiased blog. Thank you very much for your time, guidance and helping naive people like me to invest hard earned money in a beneficial way.
    My personal information:
    Married from 2yrs and 6 months, no children
    Take home Salary: Rs 68000/month
    Life Insurance Premium: Rs 18484/yr
    Health Insurance: Rs 7000/yr
    Rent: Rs. 15000/month
    To parents: Rs. 15000/month
    I don't have any loan, and do not own any property.

    I am planning to invest atleast Rs 10000/month. This is purely for investment (long/short) and not for tax saving purpose.
    I sincerely request your guidance in planning my investment.
    1. What should be the best investment/saving option? MF/ELSS/ULIP???
    2. If I opt for ELSS, which one should I go for? DO I need to buy ELSS though broker or can I directly call the AMC to buy units?
    3. Do you suggest any other option of investment/saving with better returns?
    I had be grateful to you if you could help me in this regard.
    Thanks in advance.
    Thanks & regards,
    Yogi

    ReplyDelete
  6. Dear Yogesh,
    As you already know, I charge for consultancy depending on the advise required and offered. If this is your only question, then the details are not enough. I would also like to know whether you have got any Mutual Fund investments. Also, what is the Life Insurance you are having., is it endowment, term, money back, etc, and do you have any EMI, etc. Please send these details to my email sharesher@indiatimes.com . After going through your requirements, I will be quoting my fees and you can send the same to me by Bank Transfer of Funds thourgh online or send a Demand
    Draft in favour of 'Srikanth Matrubai' payable at Bangalore.

    my Bank Details are

    ICICI Bank

    SB A/c No.029701527711

    MICR code

    : 560229020

    RTGS/NEFT/IFSC Code : ICIC0000297

    BTM layout Branch,

    Bangalore

    Regards,

    Srikanth Matrubai

    ReplyDelete

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