Page 37 - mutual-fund-insight - Mar 2021_Neat

any merit in continuing with ELSS 4LKPHU YVSSPUN YL[\YUZ
even if they do not look to avail Staying invested for a longer period reduces the risk of volatility
the tax exemption. Perhaps not. A
comparison with multi-cap funds 35 % 3-year 5-year 7-year
(now flexi-cap) suggests that there 28
is no specific advantage one can 21
derive by choosing ELSS over
them. At the category level, there’s 14
hardly any difference in their 7
returns. On the contrary, you give 0
up on liquidity in the case of
ELSS. So, if you no longer need to -7
invest to save taxes, you can shift January 2011 December 2020
Data for open-end tax-saving funds
to flexi-cap funds.
,3:: ]Z MSL_P JHW M\UKZ! @ YVSSPUN YL[\YUZ
ELSS or NPS Tier II tax-saving
plan? A comparison with flexi-cap funds (erstwhile multi-cap) suggests that there is no specific
Some investors also enquire about advantage you derive by choosing ELSS over them, except the tax benefit.
the NPS Tier II tax-saving plan, 15% ELSS Flexi-cap
which was launched last year. 12
Even though it is grossly different
from ELSS on asset allocation, the 9
two still directly compete for a 6
share of one’s tax-saving invest- 3
ment pie. Unlike the ELSS which
is an all-equity product, the NPS 0
Tier II tax-saving plan invests only -3
10–25 per cent of your money in December 2019 December 2020
equity. Also, the latter is currently Category median of open-end direct plans
available only to central-govern-
ment employees. So, it may appeal you have only round-tripping ELSS funds can be painted with
to conservative investors who are money that has already been the same brush. There are plenty
employees of the central govern- invested in the markets, you need of reasonably priced ones as well.
ment and want only limited expo- not spread it out over a number of In fact, the range of expenses is
sure to equity. months and can reinvest it at one quite wide. If one looks at direct
But for a vast majority of inves- go. However, make sure that you plans, these ratios range from as
tors who can remain invested for don’t end up saddling yourself with low as 0.25 per cent to an outra-
the long term and can withstand capital-gain taxes while doing this. geous over 2 per cent.
the intermittent volatility, ELSS Of course, expenses tend to
should be the de facto choice. The expense factor reduce with an increase in size
In fact, investors who’ve experi- Now one thing that sits odd is the because SEBI prescribes a stepped
enced pandemic-induced financial expense ratio of many funds in the decrease in the maximum allowed
hardship (pay cuts, job losses, etc.) category. While several funds are expenses with a growing AUM.
and are unable to generate invest- charging over 1.25 per cent for the But that doesn’t mean that AMCs
ible surplus for saving taxes direct plan, some are even cannot voluntarily charge lower. In
should consider redeeming and charging over 1.5 per cent. At a fact, some AMCs take a lead in this
reinvesting some of their past time when index funds are giving by keeping expenses low even
investments to avail the tax their active counterparts a run for when their asset sizes are modest.
exemption. After all, the tax saved their money, these expense ratios Read on as we present to you our
is also money earned. And since are on the higher side. But not all favourites from this category.

Mutual Fund Insight March 2021 35
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