• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

I would like to invest in the systematic investment plans of three leading ELSS funds. I would not require this money for 3-5 years and do not need current income from it. I prefer ELSS funds because I feel there is less pressure on fund managers to maintain a liquid portion in the corpus to meet redemption pressures. Is this a good strategy? Could you suggest some funds?

Mukesh Patel

Ahmedabad

You are right in your assessment of ELSS (Equity-Linked Savings) funds. Given their relatively small size and stable assets, the manager of an ELSS fund can take a longer-term view when he builds the portfolio than would a manager who has to cope with the pressures of managing an ordinary open-end fund with its volatile assets.

Over the past 18 months, quite a few ELSS funds have outperformed diversified equity funds from the same stable.

Investing through the Systematic Investment route is ideal, as it would reduce the risks associated with the timing of your initial investment. However, remember that ELSS funds, too, would be subject the downside risks that characterise all equity funds, which would mean that you could lose part of your investments if the equity market falls sharply from the time of your initial investment.

Under the prevailing tax laws, your investments in the fund would be eligible for tax rebate under Section 88 of the I-T Act. But watch out for any changes in tax laws this year.

This will make it difficult for you withdraw your money if you are uncomfortable with your fund's performance. But if you are willing to assume some degree of downside risk and can wait for a five-year period, this should not deter you from going in for an ELSS fund.

Among the various ELSS funds available for investment, you can consider HDFC Taxsaver and Alliance Capital Tax Relief among your top choices in light of their consistent five-year track record. If you have a large sum to invest and would like to diversify further, you may add Franklin India Taxshield and Birla Equity Plan to your choices.

Queries may be e-mailed to mf@thehindu.co.in, or sent by post to Business Line, 859/860 Anna Salai, Chennai 600002.

Aarati Krishnan

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Investment Quiz

Copyright © 2004, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line