AMCs are launching ELSS with the hope that people will invest in such funds at least for saving on tax
In fact, despite volatile and uncertain equity markets, asset management companies have begun to launch equity linked saving schemes (ELSS) with the hope that investors would invest in such funds at least for saving tax. Recently, Bharti AXA, DBS Chola, JP Morgan and Tata AMC have launched their ELSS funds.
ELSS funds are like other equity mutual funds with tax benefit. Investment in ELSS fund qualifies for deduction under 80C only if the money is invested for a minimum of three years. But in such fund investors need to stomach higher risk.
Interestingly, some of these fund houses already have existing ELSS funds in their current portfolio but have come out with new fund offers (NFOs) in the same category. For instance, Tata Mutual Fund already has a tax gain fund called Tata Tax Advantage Fund but has come out with a new ELSS fund called Tata Infrastructure Tax Saving. Same is the case with DBS Chola Mutual Fund, which has an existing tax gain fund called DBS Chola Taxsaver and has recently launched its NFO, which is again an ELSS fund.
The performance of ELSS funds are not very impressive in this year. The returns are in line of other diversified equity mutual funds and they are down by more than 40% in this year. Since 80% of the money collected through ELSS funds is necessarily to be invested in the equity market, these funds are not insulated from general equity market fall.
Due to relatively higher holding period fund managers find themselves more comfortable managing such funds as these funds give liberty to fund manager for taking either cash calls or going cautious or using specific strategy. Usually we do not take higher cash calls but since the time horizon is three year we may take cash calls. We will not take cash calls. The cash call is attractive in short term but since three year horizon is pretty long term and hence taking cash call is not necessary.
Usually investors find themselves in a fix deciding whether to invest in an NFO or existing fund. Typically investors should look to invest in a new fund only if the investment proposition is compelling.
Before investing in any fund one must look at the track record, stability of investment team, consistent performance across market cycles and investment style.
In fact, despite volatile and uncertain equity markets, asset management companies have begun to launch equity linked saving schemes (ELSS) with the hope that investors would invest in such funds at least for saving tax. Recently, Bharti AXA, DBS Chola, JP Morgan and Tata AMC have launched their ELSS funds.
ELSS funds are like other equity mutual funds with tax benefit. Investment in ELSS fund qualifies for deduction under 80C only if the money is invested for a minimum of three years. But in such fund investors need to stomach higher risk.
Interestingly, some of these fund houses already have existing ELSS funds in their current portfolio but have come out with new fund offers (NFOs) in the same category. For instance, Tata Mutual Fund already has a tax gain fund called Tata Tax Advantage Fund but has come out with a new ELSS fund called Tata Infrastructure Tax Saving. Same is the case with DBS Chola Mutual Fund, which has an existing tax gain fund called DBS Chola Taxsaver and has recently launched its NFO, which is again an ELSS fund.
The performance of ELSS funds are not very impressive in this year. The returns are in line of other diversified equity mutual funds and they are down by more than 40% in this year. Since 80% of the money collected through ELSS funds is necessarily to be invested in the equity market, these funds are not insulated from general equity market fall.
Due to relatively higher holding period fund managers find themselves more comfortable managing such funds as these funds give liberty to fund manager for taking either cash calls or going cautious or using specific strategy. Usually we do not take higher cash calls but since the time horizon is three year we may take cash calls. We will not take cash calls. The cash call is attractive in short term but since three year horizon is pretty long term and hence taking cash call is not necessary.
Usually investors find themselves in a fix deciding whether to invest in an NFO or existing fund. Typically investors should look to invest in a new fund only if the investment proposition is compelling.
Before investing in any fund one must look at the track record, stability of investment team, consistent performance across market cycles and investment style.
