With just about 75 days remaining in the current financial year, now is as good a time as ever to calculate your 80C "gap", that is, your deficit from the maximum ceiling deduction limit of Rs. 1.5 lakh. Remember, you could save up to Rs. 46,350 in taxes under Section 80C.
Over the past few years, ELSS (Equity Linked Savings Schemes) Mutual Funds have gained prominence as a tax saving instrument, largely propelled by an increasing awareness regarding the poor returns afforded by traditional life insurance policies. ELSS, though risky, provide investors with the chance of earning significantly higher returns than Life Insurance and other traditional instruments over a 5 to 7-year time horizon.
In case you're in a dilemma over which ELSS to pick to fill out your remaining 80C quota, look no further than these fantastic funds.
Axis Long Term EquityAxis Long Term Equity Fund (ALTE) is the country's largest ELSS, with Rs. 10,409 crores in AUM (Assets Under Management); a tag it has earned rather swiftly in a relatively short 7-year time horizon. ALTE follows a multi-cap strategy, but tends to hold half of its portfolio into solid large cap stocks. As a strategy, the fund tends to focus on picking high-growth businesses with ustainable competitive advantages. At 1.98%, it has a lower expense ratio than most of its peers. At present, ALTE is running a 40-stock portfolio, with a concentrated holding (50.29%) in the top 10 stocks; HDFC Bank, Kotak Mahindra Bank and HDFC Limited form the top three holdings of the fund. ALTE has delivered 21.79 per cent annualized returns over the past five years, outperforming its benchmark (S&P BSE 200) by more than 8 per cent per annum.
Reliance Tax SaverWith a 45 per cent allocation to mid and small caps, Reliance Tax Saver (RTS) is a relatively aggressive ELSS, and is therefore ideal for those who would like to plan for their long-term financial goals using a tax saving investment. RTS follows a blended strategy between picking fundamentally sound, high growth stocks and selecting "alpha creating" value stocks that could become multi baggers eventually. The fund sets aside 20-30 per cent of its portfolio for MNC companies with robust fundamentals: this might help it outperform its peers in the next two to three years. RTS has performed outstandingly well over both 5 and 7 year periods, delivering 22.2 per cent and 15.1 per cent annualized returns, respectively. At present, it's top three sectors are Financial, Automobile and Engineering.
DSP BlackRock Tax Saver DSP BlackRock Tax Saver (DSPBRTS) recently completed 10 years since its launch, and has since built out a solid track-record of consistent outperformance. It boasts of an impressive "since-inception" return of 14.01% per annum (do bear in mind the carnage of 2008-09 that swept the markets into a tizzy barely a year after its launch). DSPBRTS has traditionally favoured more aggressive investments into mid and small cap stocks, but has off late rejigged its portfolio into a more "large cap" oriented one - at present, it holds only 26% of its portfolio in small and mid-cap stocks. The fund also maintains a more diversified portfolio than its peers, holding 68 stocks as on date. It has delivered an impressive 21.31 per cent per annum over the past five years.
End Note: ELSS funds are high risk/ high return instruments, and investors are advised to assess their risk profiles before deciding whether to invest or not. Additionally, investors are advised to enter with a minimum time horizon of 5 to 7 years, although the mandated lock-in finishes within three years. For best results, start an SIP in an ELSS at the very beginning of the Financial Year.
