ELSS vs pure equity mutual fund

POSTED BY Yogesh Tiwari ON December 15, 2010 10:38 pm COMMENTS (3)

Hi Manish,

It’s time of year, when everybody starts looking for tax saving measures.

I want to invest in mutual funds. I did slight check. Here’s what I found.

My focus is on investing in mid-cap fund for a period of 10yr+

Non-tax saving top10 midcapFund  1yr     3yr     5yr Return as per valueresearchonline.com

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IDFC Premier Equity Plan A

32.7

9.64

28.3

Sundaram Select Midcap Reg

18.6

2.94

23

Reliance Growth

18.8

2.27

21.7

Birla Sun Life Mid Cap Plan A

17.1

2.32

20.4

ICICI Prudential Discovery

27.2

11.5

19.5

Sundaram S.M.I.L.E. Reg

8.93

1.13

19.2

ING Dividend Yield

28.9

10.1

18.7

Birla Sun Life Dividend Yield Plus

28.4

12.1

18.6

Tata Dividend Yield

31

5.54

18

Sahara Mid-Cap Fund

26.7

2.99

17.4

Average return of top10 funds

23.8

6.05

20.5

ELSS fund                                 1yr         3yr       5yr Return

Canara Robeco Equity Tax Saver

24.47

7.99

22.5

Sahara Tax Gain

20.95

5.24

18.9

Sundaram Taxsaver

11.65

0.34

18.4

HDFC Taxsaver

26.66

6.44

17.6

Franklin India Taxshield

23.76

3.84

17.4

Principal Personal Tax Saver

16.88

-4.8

16.5

Birla Sun Life Tax Relief 96

12.63

-4.77

16.4

Magnum Taxgain

12.7

-2.06

16.2

Franklin India Index Tax

15.89

-0.95

15.7

Reliance Tax Saver

24.78

2.29

15.3

Average return of top10 funds

19.037

1.356

17.5

Now, say if I’d have invested 1lac in ELSS and 1lac in mid-cap fund five yrs back.

Then                                          Now    Formula used…A=P (1+r/100) ^n

Equity 100000 -@20.4 average

253007

ELSS 100000   -@17.5 average

223970

Difference both of there return is of 30K. Now, my question, is it better to invest in ELSS  and save 20K than to put money in pure equity fund…for first 1lac of investment which helps in saving tax?

Regards

Yogesh Tiwari

 

 

 

3 replies on this article “ELSS vs pure equity mutual fund”

  1. Ramesh says:

    For the next two years,

    I will myself as much as possible put my money in ELSS (to make upto the limit of 1 lakh). Even if there is a 5% difference in the performance of a midcap fund and a ELSS, based upon past data!
    Money saved is money earned!!

    Ramesh

  2. Leave all calculations and understand the reason for ELSS and other equity diversified mutual funds.

    One should invest in ELSS when it’s the need of tax-savings. The reason is 3 years lock-in period. If the fund is not performing, you can NOT shift to other schemes. On the other hand, you can shift from one equity diversified scheme to other.

    Difference of 2-3% here and there in different time frame is ok.

    Also, all these rules are valid before DTC. Till now, Govt. has no plan to continue Sec80C benefit with ELSS.

    Hope it will help you.
    InvestmentKit.com

    1. Yogesh Tiwari says:

      Hi MoneySavingsHelp,
      My investment horizon is of 10yrs…hence, a few qtrs non-performance wont bother me. My primary basis for performance, is whatever fund I invest in should be able to outperform average of top 10 funds in that category, so to affirm my selection and continuation.

      I did further calculations, that is, upon investment of 1lac in ELSS, I still have 20K left with me(amount that I save from tax, kind of free money), that I can again put into non-ELSS MF, whereby making up for the lesser return that I make investing in ELSS MF.

      I ‘d appreciate if manish or others can second my thought.

      Regards
      Yogesh Tiwari

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