Tata India Tax Savings Fund which hasn't shown a big outperformance of category over the years but manages strong long-term returns. It has enjoyed a three-four star rating for much of the last nine years. It has now attained a five-star status.
Tata India Tax Savings Fund strategy relies on buying businesses which have compounding characteristics, strong growth potential and a high capital efficiency. A part of the portfolio is allocated to stocks in special situations arising out of the market, industry or company developments. This 'value' characteristic is likely to have helped the fund's returns in the last one year, when cyclicals have bounced back. The fund has lower large-cap weights than those of the category, at about 50 to 55 per cent, with mid-cap weights at 30 to 35 per cent and small-cap exposure at 15 to 20 per cent.
Tata India Tax Savings Fund performance relative to the category and the benchmark was somewhat patchy until 2009. But the three-year returns are now a good 8 percentage points ahead of benchmark returns and 3 percentage points ahead of the category returns. Five-year returns show equally impressive outperformance of 8 and 2 percentage points, respectively.
Historically, this fund has been good at containing losses during bear phases such as 2001, 2008 and 2011. It barely beat its benchmark during bull phases like 2006 and 2009. But it has aced the last bull phase (which started in 2014).
Tata India Tax Savings Fund for investors with some risk appetite and seeking a multi-cap approach to tax planning.
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