Well-placed to gain from a recovery
Why invest?
The fund’s ability to limit volatility, despite holding as much as half of its assets in mid caps inspires confidence. In the 2006-07 rally, tax-saving funds that held high exposure to mid caps bore the brunt of market correction. A number of them shifted their focus to large caps after that. But Religare Tax Plan has chosen to hold a good proportion of mid-cap stocks. It in fact has a higher allocation to this market-cap segment compared with its aggressive peer ICICI Pru Tax Plan.
We believe its ability to contain declines and yet, hold a quality portfolio of mid-cap stocks with healthy exposure to large-caps, will ensure the fund benefits from a rally. While such a rally may not happen anytime soon, the pockets of value in the mid-cap segment are likely to ensure that the returns are magnified when a re-rating happens.
Suitability
Religare Tax Plan is suitable for investors with some risk appetite. For those looking for pure large-cap plays, Franklin India Tax Shied may be a better scheme to go for. It is noteworthy that the fund will be subject to a three-year lock-in, given its tax-saving benefit under Section 80C. If you go for the SIP option, every installment will be subject to a similar lock-in. To avoid this, if you wish to invest lump sums, consider investing in 2-3 installments – either when you have surplus or when you see a broad market correction of over 5 per cent.
Consider holding a tax-saving fund in addition to traditional small saving schemes with tax benefits. This will provide a good hedge for the risks in equity.
Performance
- Merger of Navi Overnight Fund into Navi Liquid Fund and Navi Conservative Hybrid Fund into Navi Aggressive Hybrid Fund
- Intimation of suspension of subscription in Bandhan US Equity Fund of Fund
Winning Funds, Losing Streaks: Decoding the Mystery of Short-Term Underperformance
Wealth Conversations – November 2024- Notice of Change in Fundamental Attributes of DSP Equity & Bond Fund and DSP Quant Fund
Basic question – other than the 3 year lock-in for a Tax saving fund how is it different from a diversified equity fund? From a diversification point they look similar. Why does the govt. recognize this for tax saving and not the other diversified funds?
Good question Sheetal. Most tax-saving funds don a multi-cap cloth. To that extent their portfolio and strategy is no different. But the advantage that tax-saving funds have is the lock-in. That means they are unlikely to have unpredictable outflows. Investors hold on till the three-year period. That gives more leeway for tax-saving funds to bet on longer term strategies or taking some risks in the short term, without pressure of redemption, even if a strategy fails.
But a fund house cannot ask the SEBI for all its funds to be ELSS. In that case, investors will not have the fundamental advantage of investing in mutual funds – which is liquidity. Looking at it other way, not having a lock-in urges other diversified funds to perform well as there is a threat of redemption if performance slips. You will actually see the difference in performance of the top diversified funds compared with tax-saving schemes. Just that your yields may seem overall superior in ELSS because of the the tax deduction. – Vidya
Thanks for the details Vidya, so as I understand it is the 3 year lock-in that makes the fund eligible for tax breaks.
Right Sheetal.
I have a corpus fund of Rs 1500000 and would like to invest in HDFC MIP, RELIANCE MIP,BIRLA MIP 25 AND UTI MIP equally. I am 46 years and would like to withdraw (SWP) Rs 5000 PER MONTH from each fund after 2 years. If the fund gives 11% return pa how long the money last.
Hi Venkatraman: based on your return assumptions, Rs 20,000 withdrawn every month will allow your money to last for about 200 months or 8.3 years. But we urge you to be conservative in your return estimate. Only a handful of MIPs have delivered such returns. For instance, among your fund choices, while Reliance MIP and HDFC MIP Long Term managed 11% returns over the last 8 years, Birla Sun Life MIP Wealth 25 and UTI Monthly Income Scheme managed only around 8.5% annually. MIPs are predominantly invested in debt and have only a fifth of their assets, or ever lower, in equities. Hence, do not expect returns to be high. – Vidya
CAN I INVEST IN BALANCED FUND AND DO THE SAME?
Venkataraman, you can. But if they are equity-oriented balanced funds they will be subject to stock market vagaries. Much would depend on your risk appetite. You may write to our MF advisory team or fix an appointment for a call back if you wish to discuss about funds appropriate to your risk appetite. Vidya
Madam you have said 200 months or 8.3 years. 200 months works out to 16.6 years. Am i correct?
Yes Venkatraman, sorry that was an error. It is 200 months or 16.6 years.
Mam,
i have invested a sum of rs. 50000/- in religare tax saving bond will i get deduction u/s 80C for this or not
Hello Shubham, If you meant religare Invesco Tax Plan (mutual fund), yes, you would get 80C deduction. Tks, vidya
Mam,
i have invested a sum of rs. 50000/- in religare tax saving bond will i get deduction u/s 80C for this or not
Hello Shubham, If you meant religare Invesco Tax Plan (mutual fund), yes, you would get 80C deduction. Tks, vidya
I have a corpus fund of Rs 1500000 and would like to invest in HDFC MIP, RELIANCE MIP,BIRLA MIP 25 AND UTI MIP equally. I am 46 years and would like to withdraw (SWP) Rs 5000 PER MONTH from each fund after 2 years. If the fund gives 11% return pa how long the money last.
Hi Venkatraman: based on your return assumptions, Rs 20,000 withdrawn every month will allow your money to last for about 200 months or 8.3 years. But we urge you to be conservative in your return estimate. Only a handful of MIPs have delivered such returns. For instance, among your fund choices, while Reliance MIP and HDFC MIP Long Term managed 11% returns over the last 8 years, Birla Sun Life MIP Wealth 25 and UTI Monthly Income Scheme managed only around 8.5% annually. MIPs are predominantly invested in debt and have only a fifth of their assets, or ever lower, in equities. Hence, do not expect returns to be high. – Vidya
Madam you have said 200 months or 8.3 years. 200 months works out to 16.6 years. Am i correct?
Yes Venkatraman, sorry that was an error. It is 200 months or 16.6 years.
CAN I INVEST IN BALANCED FUND AND DO THE SAME?
Venkataraman, you can. But if they are equity-oriented balanced funds they will be subject to stock market vagaries. Much would depend on your risk appetite. You may write to our MF advisory team or fix an appointment for a call back if you wish to discuss about funds appropriate to your risk appetite. Vidya
Basic question – other than the 3 year lock-in for a Tax saving fund how is it different from a diversified equity fund? From a diversification point they look similar. Why does the govt. recognize this for tax saving and not the other diversified funds?
Good question Sheetal. Most tax-saving funds don a multi-cap cloth. To that extent their portfolio and strategy is no different. But the advantage that tax-saving funds have is the lock-in. That means they are unlikely to have unpredictable outflows. Investors hold on till the three-year period. That gives more leeway for tax-saving funds to bet on longer term strategies or taking some risks in the short term, without pressure of redemption, even if a strategy fails.
But a fund house cannot ask the SEBI for all its funds to be ELSS. In that case, investors will not have the fundamental advantage of investing in mutual funds – which is liquidity. Looking at it other way, not having a lock-in urges other diversified funds to perform well as there is a threat of redemption if performance slips. You will actually see the difference in performance of the top diversified funds compared with tax-saving schemes. Just that your yields may seem overall superior in ELSS because of the the tax deduction. – Vidya
Thanks for the details Vidya, so as I understand it is the 3 year lock-in that makes the fund eligible for tax breaks.
Right Sheetal.