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POSTED BY ON June 18, 2013 1:19 pm COMMENTS (9)
Hi Ashal/Manish/Pattu,
Great Job guys 🙂
I have been investing in HDFC Tax saver(G) fund for the past 2 years VIA SIP, the returns are petty lousy when compared to its peer.
I would like to know your views on should i continue it or switch to other fund?
If yes, can you suggest an alternate ELSS fund?
Thanks
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I agree with you. Trouble is the more I think about the more I would like to get rid of active funds in my folio and just use passive funds.
Find a good index fund and just worry about rebalancing and tax. Tired of monitoring fund performance.
Thanks for the advice Guys,
I need clarification on the following:
1. Pattu, any particular reason as to why one should not invest via SIP in ELSS?
2. Ashal, Should the investment be lumpsum or SIP?
Thanks
Every SIP installment has a 3 year lock in period. So if you want to move the money out of a underperforming fund you cannot do it in one go and will have to do so in installments.
What Ramesh says with regard to long term view is good advice. Although I am not sure about the fund managers convictions!
You could simply stop and SIP and invest periodically in this fund or something else. Patience is the key.
A fair measure of Convictions is the Churning Amount / Turnover Ratio of the fund’s money. Quantum, Franklin, HDFC’s both ELSS have fairly decent value for that, and these are in line with the general management styles of other equity funds of the respectively same fund houses. 🙂
Ref: http://www.valueresearchonline.com/funds/h2_typecomp.asp?mode=portfolio&Type=1&objective=18
Yes I am aware of that. I will say 19 and 20 are comparable. Not 20 and 4.
In any case since this is a figure typically determined each year I will be comfortable looking at this for each year since inception along with performance.
I am still not comfortable equating it with conviction although I agree it is closest mathematical indicator.
Sometimes looking at 1 y returns and corresponding turnover % can give you bizarre statistics:
Quantum ELSS with 4% churning manages to beat category average. So does Sundaram ELSS (nearly same return as Quantum’s) but with a churning of 144%
HDFC with 20% falls way short.
Not saying one should exit HDFC based on this but saying looking at just one turnover % does not help me much.
That said HDFCs fund manager has an excellent track record and I certainly will not question his competence.
Keeping track over years helps you having a “vague” idea about the funds (No, I do not track all funds).
HDFC’s funds behave in this manner. Their main funds have 20-30% values (translating into years means overall total keep time is 4-5 years on an average). If you will check DSP’s funds have very high turnovers but that is their style of working and there is nothing wrong with it.
However, what I want to emphasize is that if a fund has been doing it at 20-30% over many years, and even with a bout of underperformance, it is Continuing at the same style (we can only have vague ideas about style in this manner, and not very exacting), then it will be safer to assume that the style of the fund manager is consistent and since in the past this style has worked well, over next few years, it should do well too.
Quantum’s funds work with very less churning and their style is working great in last few years, combined with less charges. But let some momentum driven markets come and they will lag behind provided they remain committed to the same style. Although, even then the low cost will definitely help them.
Variable churning funds are difficult to depend, in my opinion.
And you are right in saying, just looking at the turnover % alone does not help. It is just one of the factors of many.
As I have mentioned a number of times, a decent manager in a good FMC combined with consistent style is more than enough. If you have got one of those funds, I would say continue using it and more so during underperformance cycles because these are the actual periods which will make you more money. A bear phase in markets or your particular fund is the best time to invest.
And what exactly is wrong with lousy returns in a 2 year-frame. The manager is same, and still has convictions about his portfolio. It would be better if you continue to invest in the same fund for more time. If you are having long term views, then a 2 year underperformance is plain senseless. Just continue with this decent fund house’s well managed ELSS fund. There is nothing wrong in there.
Dear maruti, the fresh investments for ELSS can be done in Quantum Tax saver.
thanks
Ashal
It has not done well for the past two years or so. I suggest you stop the SIP (best not to do SIP in any ELSS fund) and invest elsewhere. You can keep the existing units and give the fund some more time to recover. It has a good track record so it deserves some more time.