Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
Popular Search: form 3cd :: TAX RATES - GOODS TAXABLE @ 4% :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: articles on VAT and GST in India :: VAT Audit :: Central Excise rule to resale the machines to a new company :: ACCOUNTING STANDARD :: ARTICLES ON INPUT TAX CREDIT IN VAT :: due date for vat payment :: TDS :: ACCOUNTING STANDARDS :: cpt :: VAT RATES :: list of goods taxed at 4% :: empanelment
« News Headlines »
 ICAI to organise two-day international conference in Hyderabad
 Here's how to calculate tax payable on your capital gains
 Income Tax calculations for the financial year 2016-17
 CPE Events 17 October - 22 October 2016
 High Court raps I-T Department for wrong tax demand
  CBDT signs 5 advance pricing pacts with Indian taxpayers
 Finance ministry warns tax officials of action against GST protest
 Big changes for small units under GST
 Parliament’s winter session to begin on November 16 to expedite GST rollout
 Income-tax (27th Amendment) Rules, 2016 - 92/2016
 Announcement - Clarifications in Respect of MEF 2016-17

Pick the right tax-saving fund
February, 24th 2016

With the end of the financial year drawing near and offices demanding proof of tax-saving investments, a lot of people will buy products such as tax-saving (equity-linked saving schemes or ELSS) funds in the coming weeks. Since last-minute purchases are made in a hurry, a lot of mis-buying as well as mis-selling happens. Here’s what you should look up before deciding on an ELSS fund.

Look at the nature of the fund: whether it is large-cap, multi-cap or mid-cap oriented. “Take into account your risk profile while choosing a tax-saver fund,” says Vidya Bala, head of research at Conservative investors should opt for a large-cap ELSS fund, while those with a higher risk appetite might opt for a multi-cap fund. The style sheet tells you about a fund’s market-cap orientation.

Next, look up the fund’s track record. When looking at trailing returns (one-year, three-year, five-year vis-à-vis category average), give higher weightage to longer-term returns. Do look at calendar year-wise returns as well over the past five to seven years (compare with category average) to know if the fund has been consistent.

Examine the nature of the portfolio. The equity count (number of stocks held), stock and sector concentration (in the top 10 stocks and sectors) would tell you if the fund is concentrated or diversified. A more concentrated fund can give you higher returns, but it will also fall harder if the fund manager’s calls go wrong. If you have to choose between two funds with similar levels of returns, go with one that is better diversified. Remember also that beyond 25-30 stocks, there is not much benefit from diversifying further.

Experts say the size of the fund shouldn’t be a primary criterion for selection. “Large assets under management become a deterrent to performance only in the mid- and small-cap space, not in large-cap funds,” says Vishal Dhawan, chief financial planner at Plan Ahead Wealth Advisors. The fund size, however, shouldn’t be very small (below Rs 100 crore) or else there is the risk of the fund house closing down or merging the fund.

The level of risk that the fund takes to fetch its returns is also important. Make sure that the fund’s risk-adjusted returns (indicated by Sharpe ratio and Treynor ratio) are above category average.

Check how much the fund manager churns his portfolio, as indicated by the turnover ratio (ELSS category median 47.50 per cent). Prefer funds that have a buy-and-hold approach.

Give preference to funds with a lower expense ratio (category average 2.42 per cent). Pay a high expense ratio only if it is justified by the fund’s performance. Avoid funds that take high cash calls. A fund that moves into cash in a big way (beyond five per cent) during a market downturn risks getting left behind when the market revives. Look for constancy at the helm. If the fund manager has changed recently, the track record of the fund loses its meaning.

In the next financial year, invest in an ELSS via a systematic investment plan or a systematic transfer plan so that your tax planning doesn’t happen at the last moment and you get the benefit of rupee cost averaging. Some of the funds you could consider for investing are Axis LT Equity, Franklin India Taxshield, BNP Paribas LT Equity, Birla SL Tax Plan and Religare Invesco Tax Plan.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2016 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - We Bring IT. Offshore software outsourcing company. We use Global Delivery Model (GDM) and believe in Follow The Sun principle

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions