Which ELSS tax saver to select for investment!!!

This year is probably the last year when we can take advantage of ELSS Tax Saver schemes before DTC (Direct Tax Code) kicks in after April of 2013. 

But which ELSS schemes to select for investment and on what basis?

• Remember for any ELSS scheme we have a lock in period of 3 years
• Shall we invest in best performing funds? BUT over what period!!!
• Is there a way to avoid or minimize losses yet make good gains!!!
• Can we apply any technique!!!

More about DTC effects on ELSS Funds.


Most of us will scramble in next two months to identify which ELSS fund to choose for investment and save some taxes. Either we will follow our brokers advice or simply choose an ELSS scheme which we feel will would provide good returns or not significant losses.

Lets see if we can determine a logical approach and come up with some choices:
Step 1 - 

• Go to MoneyControl website - Find your Fund
• Criteria: 

                        Age of Fund                = Greater than 5 years
                        Fund Category           = ELSS
                        Fund Type                   = Open Ended
                        Performance Period  = You will have to find out TOP performing fund for 5yr / 3yr / 2yr / 1yr / 6mths. Select funds                    
                                                                  with CRISIL ranking of 1 or 2

Step 2 - 
Now you should have 5 ELSS funds identified as potential candidates for investment

We found below candidates: (The above scan was run on Jan 12th, 2013)

1. Can Robeco Eqty TaxSaver (G)
   
2. Franklin India Tax Shield (G)
   
3. BNP Paribas Tax Advantage Plan (G)
   
4. Reliance Tax Saver (ELSS) (G)
   
5. ICICI Pru Tax Plan (G)
   

Step 3 - 
Use Money Control Funds compare tool. Make sure you check out the graph comparison in various time frames.
Another Funds compare tool can be found here.

Based on above information which 2 out those 5 ELSS Funds you are most likely choose? - make a note of your answer

1. BNP Paribas Tax Advantage Plan (G)
   
2. Reliance Tax Saver (ELSS) (G)

Last week we made a post on where the market is headed in 2013. We arrived at an assumption that 1st half of 2013 might be good but next half might be painful which might continue in 2014 as well. You can read about last weeks post here. Now based on additional information which 2 ELSS Funds you are most likely to choose? - make a note of your answer

1. Can Robeco Eqty TaxSaver (G)
   
2. Franklin India Tax Shield (G)

Is it same as your previous answer or has it changed!!! Which 2 to choose!!!

• Since market may experience change in trend in next 3-6 months
• Since we are investing for a horizon of 3 years lock in period
• We want to play it safe and less risky even though we are investing in Equity Linked Savings Schemes

Based on above reasoning and considering market outlook for this year and next, it would be wise to invest in:

1. Can Robeco Eqty TaxSaver (G)
   
2. Franklin India Tax Shield (G)

We hope this will provide you with enough information to make a wise decision on picking the right ELSS Fund for your investment goals.

Good Luck!!!