HDFC Tax Saver (ELSS)

HDFC Tax Saver (ELSS) is managed by Vinay Kulkarni and Rakesh Vyas. The fund has been consistently topped the charts except in 2007 when it underperformed its benchmark. This is a good fund to hold on to for the long term goals combined with tax savings.

Where does HDFC Tax Saver (ELSS) invest your money?

HDFC Tax Saver (ELSS) is a large & mid cap fund which means most of your money will be invested in stocks of large and medium sized companies. About 23.44% of the fund’s money is allocated to stocks of mid-size companies, 63.51% to stocks of large size companies and close to 9.53% to those of small companies. Mid-size stocks can give kicker returns as they turn into large stocks but this happens not so frequently.

Suitable for what?
  • Child's education
  • Child's marriage
  • Planning for retirement
  • Home Purchase
Not suitable for?
  • Creating wealth
  • Lifestyle needs
  • Short term needs
How much to invest?

Minimum one time investment is Rs 5000 and minimum SIP is Rs 500 per month. You can make HDFC Tax Saver (ELSS) as part of your core portfolio. Core portfolio is investments that are made for your basic goals and makes up about 70% of your investment portfolio. Do not make the mistake of investing in too many mutual fund schemes. At any point of time do not have more than two mutual fund schemes in your core portfolio. 

Our recommendation for fresh investment
Not Recommended
Our recommendation for existing investment
Recommended
How has HDFC Tax Saver (ELSS) performed in the past?

If you had invested Rs 1 lakh when the fund was launched in Dec 1995, your value of investments would be around Rs 23.41 lakhs. If you had invested Rs 1 lakh for 5 years, your value of investments would be around Rs 1.45 lakhs. The performance has been better than the average of all mutual funds in this category. The fund has been giving 8% returns for those who have stayed invested for the past 5 years.

Assume you had invested Rs 10,000 every month in HDFC Tax Saver (ELSS) through SIP for the past 5 years today you would have around Rs 7.91 lakhs.

How HDFC Tax Saver (ELSS) will perform in the future?

Needless to say no one can predict the future of markets. We have firm belief in the future prospects of the Indian economy. If the Indian economy grows at 9% then the leading companies tend to do well. When the companies do well their stock prices follows their performance. So if you expect the economy to grow at 8% then you can expect top performing mutual funds to give you returns in excess of 14%.

Mutual fund schemes that have exposure to mid-size companies tend to show results when their bet on few companies comes true. We advise you to avoid too much of star gazing and future prediction. Be reminded that equities are one of the asset classes that have the potential to beat inflation. Your aim for core portfolio should be to beat inflation.

When to review?

Once you invest in the fund do not get into the habit of checking the NAV daily or monthly. Review the performance once a year. Too much attention is not good.

What charges apply?

A onetime fee of Rs 100 is charged on investments over Rs 10, 000 made through distributors. If you are a first time investor in mutual funds an additional Rs 50 is charged to cover KYC expenses. This is deducted from your investment and can be skipped if you buy directly from the mutual fund via their website or offices.

No exit load applies for units withdrawn from this scheme. Expense ratio of HDFC Tax Saver (ELSS) is 2.30%. This is charged to recover the fund management company’s expenses on securities’ transactions, commissions, registrar fees, etc. Your mutual fund returns will be total returns less expense ratio.

When to exit?

There is a lock-in period of 3 years on this fund, which means that you cannot sell these funds within 3 years of your purchase date.Withdraw when your goals are closer to achievement. Do not remove the money when the markets go up or down. Do not panic. Stick to your goals.

What are the tax implications?

The returns in a mutual fund are absolutely tax free, provided you do not withdraw within 1 year. HDFC TaxSaver qualifies for sec 80C ELSS benefits, which means you can invest up to Rs 1 lakh a year in this fund and deduct the amount from your gross total income for computing income tax.

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