Follow The SIP Route For ELSS Investments
![]()
Three years ago, I had invested in ING Tax Savings Fund. My lock-in period will expire soon. Should I remain invested in this fund or switch to another ELSS?
- Rajan D’sa
There are only five funds that have outperformed the Nifty index on a three-year basis, and the ING Tax Savings Fund is not one among them. The table lists those ELSS funds that have managed to beat the Nifty:
| Nifty Outperformers |
|---|
| Scheme | 1 Month | 1 Year | 2 Years | 3 Years | 4 Years | 5 Years |
|---|
| Axis LT Equity Fund(G) | 2.02 | 9.1 | 10.45 | 6.27 | NA | NA |
| BNP Paribas Tax Adv Fund(G) | 3.21 | 9.16 | 10.49 | 4.07 | 8.99 | 8.11 |
| Franklin India Taxshield(G) | 2.76 | 5.18 | 7.58 | 3.19 | 9.78 | 11.44 |
| Quantum Tax Saving Fund(G) | 3.16 | 6.73 | 10.2 | 2.19 | 10.92 | NA |
| IDFC Tax Advt(ELSS) Fund-Reg(G) | 3.1 | 7.95 | 9.65 | 1.61 | 8.4 | NA |
| ING Tax Savings Fund(G) | 3.32 | 1.69 | 1.7 | -2.32 | 5.52 | 4.67 |
Since its inception in 2004, ING Tax Saving Fund has generated a return of only 11.58 per cent p.a. (CAGR), while the BSE 100 index has generated a CAGR of 14.3 per cent p.a. during the same period.
The fund’s long-run track record is as shown in the chart:
It has also underperformed its category over the past few years. In spite of its volatility (standard deviation), the fund has not delivered as much as some of its peer group funds have. A random set is shown in the following table:
In fact, the ELSS category as a whole has disappointed investors with the high volatility and returns that have not been commensurate with the risk taken. Of the ones measured, there were five outperformers as compared to 22 underperformers! It is quite possible that the fund managers have been complacent about the three-year lock-in and taken inordinate risk. This risk might have possibly worked in a bull market, but we have been seeing listlessness in the stock markets since 2008. The three-year returns of the Nifty were at 1.12 per cent p.a. and those on the BSE 100 were at 1.71 per cent.
| Fund Statistics (As On September 16, 2013) |
|---|
| Scheme | CAGR (%) | Standard Deviation (%) |
|---|
| 1 Year | 3 Years | 5 Years | 1 Year | 3 Years | 5 Years |
|---|
| ING Tax Savings Fund(G) | 1.69 | -2.32 | 4.67 | 4.3 | 4.28 | 7.76 |
| Franklin India Taxshield(G) | 5.16 | 2.73 | 12.27 | 4.39 | 3.98 | 6 |
| HDFC Long Term Adv Fund(G) | 5.44 | 0.17 | 10.29 | 4.39 | 4.7 | 6.82 |
| Axis Long-Term Equity | 9.1 | 6.27 | N.A. | 4.5 | 4.22 | 4.05 |
Till we see another bull market rally, it is unlikely that we will have a good performance from tax-saver funds – that is for those investments made three years ago. There has been a lot of inconsistency too, and the set of top performing tax-saver funds keeps varying.
If one wishes to invest in ELSS schemes, it is makes more sense to follow the SIP route. Plan your investments right from April instead of making a hurried lump sum investment in the following March when the realisation dawns that you have not covered your Section 80 requirements.