Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Tax-saving funds – Now is the time - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Jun 7, 2001

    Tax-saving funds – Now is the time

    Most investors leave their tax-related investments (like PPF, NSC, infrastructure bonds) for the eleventh hour. While that may be okay for fixed income instruments, there is sound investment rationale for staggering investments in equity linked savings schemes (ELSS).

    Investors who have been looking at ELSS as a mere tax-saving instrument and bunch up their ELSS investments in February/March are missing the rationale behind rupee-cost averaging or the systematic investment plan (SIP). Unlike say PPF, NSC and infrastructure bonds, which have a fixed income element and the cost of investment follows predictable lines the case with ELSS is exactly the opposite.

    UTI EQUITY TAX SAVINGS 500 9.2 1.5% -12.9% -12.0%
    PRU ICICI TAX G 500 10.7 2.5% -20.3% -4.2%
    KP TAX G 500 22.5 -1.9% -21.9% 47.8%
    SUNDARAM TAX - 8.0 -0.5% -21.9% -13.7%
    DUNDEE TAX APP 500 7.4 0.1% -26.7% -22.0%

    (Returns over 12 months are annualised)

    ELSS have an equity element and the net asset value (NAV) of ELSS products is anything but predictable. In a period of 12 months, an ELSS could fluctuate upwards or downwards by anywhere between 10-40%. So while a boom in equity markets (say around January-March) is definitely a good thing for the investing community at large, an investor looking for tax breaks would have to enter an ELSS when it is on the higher side in that period (January-March). The upside on his investments at such a high entry price would be little to medium.

    On the other hand, an investor who has been making moderate investments in ELSS throughout the year would have a lower average price (NAV). This investor could really ride the growth in equity markets, vis-ŕ-vis the investor who invested lumpsum in ELSS during the boom.

    With ELSS offering SIP facility at low levels (Rs 500-1,000) investors can and should really take benefit from rupee cost averaging. The risk in equity markets cannot be eliminated completely. But a little common sense and some financial discipline can go a long way in tiding over risk. With equity markets considerably low at current levels, we believe now is the time to begin investing in ELSS.



    Equitymaster requests your view! Post a comment on "Tax-saving funds – Now is the time". Click here!


    More Views on News

    The Right Financial Advisor Is Around the Corner (Outside View)

    Mar 10, 2016

    An opportunity to find an impeccably trustworthy and competent financial guardian is in the offing.

    Why financial planning should be dull and boring (Mutual Fund Corner)

    Feb 29, 2016

    Most financial planners come out as whiz kids who throw around financial jargon. But financial planning can be actually easy, provided one follows a disciplined approach.

    What Are E-Wallets And How To Use Them (Mutual Fund Corner)

    Feb 12, 2016

    PersonalFN highlights the benefits of parking a portion of your expenses in e-wallets and using them efficiently.

    Is Consumption Boom Over In India? (Mutual Fund Corner)

    Feb 2, 2016

    Mutual funds take a bearish call on the FMCG sector. The sector has started playing out due to a combination of slower growth and expensive valuations.

    How to Find a Saint Amongst Sinners? (Mutual Fund Corner)

    Feb 1, 2016

    Ethical practices help build long lasting relationships, and healthy long-term business relationships are often mutually rewarding. But PersonalFN is of the view that the financial services industry in India seems to have forgotten this.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms