There are plenty of equity linked savings schemes (ELSS) to choose from. Here is how to make the right decision. An article by fundsupermart.com

1. How to pick the right tax-saving fund
There are plenty of equity linked savings schemes (ELSS) to choose from. Here is how to
make the right decision
Author : iFast Content
When picking a fund, the biggest mistake investors can make is opting for one simply because it
has topped the latest performance chart. There are innumerable instances of portfolios getting
packed with poor funds when that is the sole parameter used.
A stark example is Taurus Tax Shield in 2006 and 2007. It was the worst performer in its
category in 2006; when the average return was 30%, this fund delivered -10%. Come 2007, with
a return of 112% it was the best performer in its category way ahead of the average 57%.
Investors who went for it simply because of the great performance in 2007 would have been a
tad disappointed. Because since then the fund has delivered middle-of-the-road annual
performances with a top quartile performance only in 2009.
Right now, investors are well prone to making the same mistake with Principal Tax Savings. If
one looks at the current trailing 1-year returns, it bags the first place. In 2012 too it put up a
chart-topping performance. But a look at its returns in the previous years is not that impressive.
In fact, in 2008, 2009 and 2011, it found itself virtually at the bottom rungs.
Another case in point is HSBC Tax Saver, which is currently doing very well. It was the fourth-
best player in 2012 in its category and is currently the second-best performer after Principal Tax
Savings in the 1-year return bracket. However, its performance in the past 3 calendar years
(2009-11) reveals that it finds no place in the first or second quartile.
Our advice, don’t opt for a tax-saving fund simply because of the latest returns. One has to look
at the returns over the past few years to ensure whether such returns are in sync with the fund's
investment philosophy or whether it is just a blip. Also, consistency of returns must be
considered. Does the fund astound periodically or can one expect a steady performance?
Another factor to look at is the composition of the portfolio. Is the portfolio packed with mid cap
stocks? If yes, are you comfortable with the risk and volatility that may accompany it? Does the
fund deliver by taking concentrated bets? If yes, again, are you willing to go with such a
strategy?
To make it simple, our research team has come up with the best equity linked savings schemes
(ELSS). The selection is based on performance (historical and consistency of returns), expense
ratio and risk. Take a good look at them to see which one is a good fit in your portfolio.

2.  Axis Long Term Equity Fund: Though a relatively new inclusion to the category, its
performance numbers cannot be argued with
 Canara Robeco Equity Tax Saver: The large-cap tilt and immense diversification
will make conservative equity investors feel right at home
 Franklin India Taxshield: A conservative bet in this space, investors will be rewarded
without undue volatility
 ICICI Prudential Tax Plan: Though not focused solely on large caps and returns not
always stable and consistent, this fund rewards its investors well
 Reliance Tax Saver: In the recent past, this one has been making its mark on the
performance charts with an actively managed portfolio
To read about the benefits of tax-saving funds under Section 80C, click here
To buy and sell mutual funds online, click here
Content Team,
Fundsupermart.com | iFAST Financial India Pvt Ltd.
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