Best ELSS(Tax saving mutual funds)

Discussion in 'Mutual Funds Discussion Forum' started by nilesh78, Jan 6, 2006.

  1. nilesh78

    nilesh78 New Member

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    Hi
    I would like to know which ELSS MF is good for investment. as well as tax saving prupose.

    Regards,
    Nilesh
     
  2. koolprakash

    koolprakash Member

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    Re: ELSS MF investment

    There are several ELSS funds which are good now. There are several advantages if you want to pick one in-addition to getting tax benefits.

    1) Since the funds (sure most of them) have a lock-in period of 3-years, the fund manager has enough liberty inorder to time the market and invest accordingly. You can also adopt the SIP route (Systematic Investment Plan) if you do want to invest in one shot

    2) Since the funds are held for atleast 3 years, you won't be paying in long term capital gains

    Some of the best picks are
    SBI Tax
    HDFC Tax Saver
    Reliance Tax saver
    HDFC Long term advantage.
    Sundaram Tax
    Pru ICICI

    All of these are performing well and have a proven track record.
    Check out the New fund offer from Fidelity (Fidelity tax Advantage Fund) which might be a good fund to invest.

    Disclaimer: Check with your broker or fund manager before investing in any of these funds. These are my personal views only.

    Regards,
    Kool
     
  3. nilesh78

    nilesh78 New Member

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    Re: ELSS MF investment

    Thanks Cool Prakash,

    I am bit confused. which one i should go with as SBI is having a bit higher NAV.
    What should i look for before investing it it.
     
  4. koolprakash

    koolprakash Member

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    Re: ELSS MF investment

    Nilesh,

    While NAV (Net Asset Value) is a true reflection of your Mutual fund value, it should not be treated to compare among peers nor should it be a major factor in analyzing a Mutual Fund because of the following reasons:

    1) It simply depends on the MF alone on how it has diversified its portfolio and 2 independent MF's can have substantial difference in their NAV's.
    Example: an FMCG fund NAV cannot be compared to a Small Cap fund on the basis of their NAV's as the stocks are different, weighatges are different...

    2) Fund performance, track record, Fund Manager, Sectorial weightage, Stocks.... are some of the major factors to analyze before u buy in any MF.

    Hope this helps.

    Regards,
    Kool
     
  5. mmsundar

    mmsundar New Member

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    Re: ELSS MF investment

    That's correct. Do not decide the funds based on NAV. Look at the performance track record for at least 1 year (3 year better) and asses how the fund has been performing over that period. If it has been giving consistant returns, then it might be a good fund. But look at other features such as fund Manager profile, lock-in period, expense ratio etc. before narrowing down a fund.

    For ELSS, I have the following order of preference:

    1. Sundaram Tax Saver:)
    2. SBI Magnum TaxGain
    3. Pru ICICI Tax Plan
    4. HDFC Long term advantage
    5. Escorts Tax plan

    Any comments?

    Thank you,
    Mohan
     
  6. silverbyte

    silverbyte New Member

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    new HDFC Long Term Equity Fund - tax benefits?

    Hi,
    I was thinking of investing in the HDFC Long Term Equity fund - this is a new fund that has been launched and is different from the "Advantage" fund.

    This fund is a close ended scheme with a lock-in of 5 years. I would like to know if it qualifies for tax savings, since there was some confusion about open ended vs close ended schemes.

    Thanks in advance.
     

  7. sarathc

    sarathc Member

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    Re: new HDFC Long Term Equity Fund - tax benefits?

    Not all closed-ended funds offer Tax benefits.

    The fund in question doesn't have any tax related benefits for the investments you make in it.

    As per the current regulations for closed-ended equity funds in force (Financial Year April'05 - Mar'06), if you opt for the dividend option, the dividend received is tax free in your hands. However the fund is liable to pay dividend distribution tax.

    The long term capital gains are exempt from tax because the maturity/redemption proceeds you get are net of STT.
     
  8. Aarati

    Aarati New Member

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    Re: ELSS MF investment

    Hello,

    I am new to this forum and to the field of stocks & MF's..
    I was going through this disscussion so thought of asking this small doubt ..
    what is the difference between a Dividend given on the ELSS and the returns given by the Fund?
    looking at the track records for last 1-3 years,which factors should be consider to determin whether the fund performing well or not?
    Thank you..
     
  9. sarathc

    sarathc Member

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    Re: ELSS MF investment

    For all practical purposes, an ELSS fund as the same as that of a diversified equity fund, the only difference being that the investments into ELSS funds is locked in for a minimum of 36 months from the date of investment.

    As the value of the portfolio holdings increases, if an investor opts for the dividend pay out option, the Fund at its discretion, will distribute some part of the profits booked back to the investor - this is called 'Dividend'. To the extent of the dividend paid out, the NAV falls. In growth option, no dividend payouts are made, one'll see only the capital appreciation as time passes by.

    Let's take an example: the initial fund corpus is Rs.1000/- (a unit at par is Rs.10/- and there are 100 outstanding units). And it increases to Rs.1300/- in an year, so the NAV would be Rs.13/-. The fund might take a decision to distribute 10% as dividend - that is 10% of the Unit at Par i.e., Rs.10/- turning out to be Rs.1/- per unit. So an investor under the dividend payout plan having 5 units in that Fund will get 5*Rs.1/- as dividend. Next to the dividend payout, the NAV falls to Rs.13/- minus Rs.1/- i.e., Rs.12/-.

    In case of the Growth option of the same scheme, no dividend payouts are made; and the NAV remains at Rs.13/- itself; and grows along with the portfolio holdings.

    So in the above scheme, irrespective of the option an investor has chosen, the return tends to be Rs.3/- per unit, or in other words 30% annualized gain.
     
    Last edited: Mar 9, 2006
  10. sarathc

    sarathc Member

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    Re: ELSS MF investment

    Well, the some of the factors I tend to observe are:

    1. the consistency of return generation over shorter and longer time periods
    2. the ability of the fund in protecting the downfall of NAV during bearish market phases (should fall less than the category average)
    3. consistent, long term association of the fund management team with the fund (frequent changes are not good)
     
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