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S. Vaidya Nathan

AN investment may be considered in HDFC Long Term Advantage, a tax-saving fund from HDFC Mutual.

It has been one of the superior performers over the past couple of years and its performance is still impressive.

The focus on mid-cap stocks, the quality of stock selection and a willingness to pick offbeat themes before they become widely fancied are factors that have been instrumental in the impressive performance and continue to inspire confidence.

We believe the portfolio has promise to deliver attractive returns over a two-to-three year period and remain bullish on this fund, which was earlier known as HDFC Tax Plan 2000.The fund has outperformed its benchmark as well as most equity funds across different phases of the market. It has also been consistent across quarters over the past four-and-half years. Over this period, it has delivered annual returns of about 50 per cent. In the past year, it has notched returns of about 55 per cent.

Despite steady inflows over the past few months, the fund's asset base still remains small at Rs 80 crore. This is also a positive as it is likely to help pursue its investment strategy without attracting attention and sizeable impact costs.

An investment of up to Rs 10,000 qualifies for rebate under Section 88 of the Income-Tax Act; there is a lock-in period of three years. Investors who have not used this option can consider exposures before March 31 to get the rebate. A superior strategy would be to invest a modest sum on a monthly basis through a systematic investment plan. Given the track record, this fund should be considered even by investors not seeking the tax break.

This fund should be considered along with HDFC Top 200, HDFC TaxSaver, Franklin Prima, Templeton India Growth, Reliance Vision and HSBC Equity as top choices for a portfolio of funds.

Suitability: As the fund invests in mid-cap stocks and small-cap stocks, the risk levels are higher. The fund has handled such risks in a manner that inspires confidence and also provided returns that have more than adequately compensated for the higher risk. Investors can opt for the dividend option, as it is exempt from tax.

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