Which ELSS to invest in, in this fiscal?

For those who have invested in ELSS schemes at the end of 2007, it should have been a wash out for your investments. That is because the Nifty index is there exactly where it was three years back. Does it mean ELSS investments are bad? The answer is no. The last three years period is an aberration where the market lost half its value in one year, regained most of it in the next before adding further gains in the next. If one is a long term investor, the returns could be handsome. Remember, this is the penultimate year of a chance to invest in equities for tax saving purpose before the Direct Tax Code comes into existence from April 01,2012.

This piece talks about the good ELSS funds one could consider to invest in. It goes on to identify those that should be avoided. Due to their consistency of returns (with appropriate risk), there are five funds that stand out. Since its launch four years back, Fidelity Tax Advantage Fund has been doing well. It has managed to beat the index in all four years. It comes at the top of the list. Closely following Fidelity Tax Advantage Fund in its consistency of performance is Canara Robeco Taxsaver. The two funds from the HDFC stable have done well over the last three years and hence their ascent to the top five. ICICI Taxplan had lost its way for a while but has come back strongly over the last two years.

If the amount to be invested is less than Rs. 10,000, it is advisable to go with the top two. However, as the quantum of corpus increases, it is advisable to spread into all these five funds.

There are three funds which are a strict No No! They are Tata Tax Saving Fund, Principal Personal Taxsaver and Principal Tax Savings Fund. It is a shame that the two funds from Principal basket having done so well in the past have failed to deliver miserably in the last three years. A real pity for Rs. 1000 crores of AUM under them which could have been better off else where.

There are three funds that look promising – Axis Tax Saver, Quantam Tax Saving Fund and JP Morgan Tax Advantage Fund. Infact, Axis Tax Saver which was launched on 31st Dec 2009 happens to be the best performing tax saver fund of the year. It is to be seen if these funds sustain their performance and attract more inflows. While Axis Tax Saver Fund has Rs 50 Cr as AUM, the rest two have less than Rs 3 Cr which is a cause of concern.

Among the other bigger tax saving schemes, SBI Magnum Tax Gain Scheme – 93 and Sundaram Tax saver have been showing lack luster performance. However, Reliance Tax Saver has been better than average and hard core Reliance mutual fund investors may go for it.
Happy Investing! Happy Tax saving!