Is it right time to invest in Tax saving Mutual Funds ?

POSTED BY Patrick ON March 30, 2014 10:10 am COMMENTS (23)

I want to invest 2500 in tax saving mutual fund for long term (more than 10 years), I have done some research and found following funds having good performance

ret  risk grade   expense ratio  alpha  beta  sharpe ratio  std dev

1) SBI magnum taxgain         23.48     below avg       2.21   3.63   0.85     0.25    15.94
2) ICICI prudential tax plan  22.23  below avg      2.40    2.94   0.87      0.19      16.99
3) HDFC taxsaver     21.44       avg    2.30    -0.57   0.88    -0.01     16.85

These funds have also performed better than their benchmark.

Please advice on these funds or any other fund. All these funds have ”direct” also ex. SBI magnum taxgain direct, which shows only 1 year returns, but i don’t know what is this

is it the right time to invest in MFs ?

23 replies on this article “Is it right time to invest in Tax saving Mutual Funds ?”

  1. ashalanshu says:

    Dear Patrick, please do whatever you like.

    Thanks

    Ashal

  2. ashalanshu says:

    Dear Patrick, then do not invest at all in ELSS. 🙂

    Thanks

    Ashal

    1. Patrick says:

      Dear Ashalanshu, why? chances of good returns for more than 10 years are high in MFs.

  3. ashalanshu says:

    Dear Patrick, how ‘ll you liquidate from Tax saver FDs in case of need in next 6-12-18-24 months?

    Thanks

    Ashal

    1. Patrick says:

      Dear Ashalanshu, i can take FD’s amount after 5 years, but in case of MF’s chances of good returns is less in 5 years(depends on market)

  4. ashalanshu says:

    Dear Patrick, please invest 8000 Rs. mly in next 6 months into Tax saver fund of your choice. HDFCTax saver, Quantum Tax saver.

    Thanks

    Ashal

    1. Patrick says:

      Dear Ashalanshu, why this big amount ?
      I have planned to invest only 5000 as SIP in equity (2500 for tax saving equity and 2500 for normal equity).
      So, the tax saving equity equals 24000 which will left 24000(48000-24000) which i will invest in tax saving FD (to use it in short-term)
      As i am looking this investment as for future, that why i am not putting big amount in them.

      1. Hemanth Chandra says:

        Dear Patrick,

        If my calculation is right, 2500*12 in tax savings mfs will be Rs. 30k.

        So you are left with Rs. 18k, and not Rs.24k 🙂

        Regards,
        Hemanth.

  5. ashalanshu says:

    Dear Patrick, what about life insurance? Are you not having any term cover as of now?

    Thanks

    Ashal

    1. Patrick says:

      Hi Ashalanshu,

      I forgot to mention my term insurance of Rs 3809, so the left amount now is approx. Rs 48000

  6. ashalanshu says:

    Dear Patrick, how much in total you want to invest in tax saver funds in the year?

    Thanks

    Ashal

    1. Patrick says:

      Dear Ashalanshu, 2000 monthly EPF was cutting from my salary and i also add 2000 monthly in PPF , so to complete 1 lakh of section 80C i am left with 52000

  7. ashalanshu says:

    Dear Patrick, you mean to say 2500 Rs. mly or one time?

    Thanks

    Ashal

    1. Patrick says:

      Hi Ashalanshu,

      I mean 2500 rupees monthly (SIP)

  8. Sumit says:

    There should not be anything called right time to invest in Tax saving Mutual Funds, the purpose is : 1) Tax saving and 2) investing in equities for that.
    So, should be investing through SIP to spread the risk of timing the market, lumpsum is never advisable, and market is already on high.

    1 more thing, how come Axis Long term equity fund didn’t make in your list, the best performing take saving fund in recent time.

    Thanks
    Sumit

    1. Patrick says:

      Hi Sumit,

      I have also checked axis long term equity fund returns, yes the returns are high but on valueresearchonline.com it is showing only 3-year returns(bacause it was launched few years ago) and i have read somewhere that it is better to invest in a fund which is giving good returns from many years.

  9. Hemanth Chandra says:

    There are two plans in investing in Mutual Funds.
    ‘Direct’ : When you invest directly with AMC.
    ‘Regular’ : When you invest via a brooker.

    Go through the below article to know the benefit of ‘Direct’ plan

    https://www.jagoinvestor.com/2013/04/direct-plan-in-mutual-funds.html

    Go to below link to know how to choose a mutual fund and decide.

    http://freefincal.com/mutual-fund-calculators/step-by-step-guide-to-choosing-a-mutual-fund/

    If you invest after 1st April, it will come under financial year 2014-15. For your tax savings for 2013-14, you have to invest before 31st March,2014.

    Regards,
    Hemanth.

    1. Patrick says:

      Hi Hemanth,

      the direct plan of every mutual fund is not showing returns for more than 1 year.
      http://www.valueresearchonline.com/funds/newsnapshot.asp?schemecode=15862

      1. Hemanth Chandra says:

        Hi Patrick,

        ‘Direct’ plans are stared from Jan 1, 2013. So, there are only 1year returns.

        The portfolio of ‘Regular’, ‘Direct’ plans are same except the expense ratio which is not there in ‘Direct’ plans which is beneficial for the investor.

        If you have not gone through the article, please go through it.

        Let me know in case of any clarification required.

        Regards,
        Hemanth.

        1. Patrick says:

          Hi Hemanth,

          Now, I have read the the document from the link given by you. It was very useful and all my doubts regarding “direct” and “regular” got cleared.
          Can u suggest me which fund i should invest in from these four funds(3 listed in my question and axis long term equity) ?

          1. Hemanth Chandra says:

            Dear Patrick,

            Go through the link which I have given in my previous comments to choose a mutual fund.

            It is the best doc I found till now to choose a mutual fund.

            It takes time to the same in the doc, but its worth doing it.

            Hope it also helps you. 🙂

            Regards,
            Hemanth

            1. Patrick says:

              Hi hemanth,

              I have read that document earlier and on its basis only i have listed the funds(comparing alpha,beta,expense ratio etc) in my question. Which fund you will suggest me from these ?

            2. Hemanth Chandra says:

              Dear Patrick,

              If you have followed the process as in the link, you will get only 1 mutual fund. 🙂
              The first step itself is to choose 4-5 funds. Here are your four funds. Now, do the analysis

              Cheers,
              Hemanth.

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