Tax Saving vs Non Tax Saving Mutual Funds

[atuljain7]

I need to know if there is any difference from a returns perspective in investing in a Tax Saving Mutual Funds vs a Non Tax Saving Mutuals funds ?

If I do not want to invest for tax purpose, then what difference will it make if I invest in tax savings funds with 3 Years lockin vs a non tax saving funds and do keep it in for 3 years ?

 

[loke4300]

Since you are already aware of the lock-in and tax benefit, here's what i think about ELSS:

the good part:
-> Fund Manager gets more time to work with the portfolio. 3 year lock in gives him a "free hand" to invest.
-> the annual expenses are slightly less as compared to non-elss diversified equity funds which goes through a lot of churning.
-> Since the funds are locked in, it kinda helps me have some discipline than book "profits" like in diversified mutual funds. Remember correction of 2008 and the subsequent mkt rally ? Well, i booked all my diversified funds the moment they turned +ve !!! Sad - i forgot my financial goal. [thanks to 'recession fear']

on the downside:
-> if the ELSS fund manager does not perform well, you are stuck with the fund for the lock in period.

In terms of return, there does not seem to be too much of a difference between the two categories.

As per valueresearchonline.com date- 04/05/2010. for 3 year period.
Category(Equity: Diversified) Average 9.52%
Category(Equity: Tax Planning) Average 9.70%

 

[praveen taneja]

I need to know if there is any difference from a returns perspective in investing in a Tax Saving Mutual Funds vs a Non Tax Saving Mutuals funds ?

If I do not want to invest for tax purpose, then what difference will it make if I invest in tax savings funds with 3 Years lockin vs a non tax saving funds and do keep it in for 3 years ?

Bro main difference is ELSS must invest in safe funds like RBI bond and gsec etc but in others this is not necessary

 

[atuljain7]

I think what Praveen is saying is also right.. as per my research... ELSS funds invest in a bit secure funds as compared to non ELSS funds.

Thus, it is not only the lock in period or tax advantage, the decision should also be taken in terms of your risk apetite.

Thus, I believe if you simply want to invest for wealth creation and can take risk, non ELSS funds might be a much better choice.