FUND FULCRUM

November 2012

India’s mutual fund industry has continued to see money going out of its equity segment for the fifth month in a row in October 2012. Compared to the previous month — when the sector witnessed two-year high net outflows — it is relatively better. However, the sector is still not out of the woods. The equity segment, where contribution by retail investors is the highest, is unable to increase its gross sales. Instead, redemption continues to be high. During October 2012 when the country's benchmark indices traded more or less in a range-bound fashion and lost a little less than one-and-a-half-percentage points, investors continued to book profits and exit their investments. According to the statistics available from AMFI, October 2012 witnessed a net outflow of Rs 1,984 crore from equity schemes, including the equity-linked saving schemes (ELSS). Though the figures are still high, it was a relief for fund managers as in September 2012, when markets rose steeply industry had seen outflows of a whopping Rs 3,559 crore. With the latest outflows, the current financial year so far has seen overall net outflow of Rs 9,258 crore from equities alone, which during the same period last year stood in the positive territory with net inflows of Rs 3,750 crore.

Total Assets Under Management (AUM) of the mutual fund industry increased by 6.7% (by Rs 48,045 crore) to Rs 7.68 lakh crore in October 2012, due to huge inflow into income and liquid funds. AUM of gilt funds increased sharply by 30.9% (by Rs 1,037 crore) to Rs 4,393 crore in October 2012 and it reported net inflow of Rs 1,018 crore, the highest in the last thirty four months. AUM of liquid funds increased by 13.6% (by Rs 19,703 crore) to Rs 1.64 lakh crore in October 2012 and the net inflow was Rs 18,176 crore. AUM of income funds rose for the seventh consecutive time in October 2012 by 8.8% (by Rs 31,076 crore) to Rs 3.83 lakh crore. The income fund category witnessed net inflow of Rs 29,340 crore. On the other hand, AUM of equity funds fell by 2% (by Rs 3,242 crore) to Rs 1.59 lakh crore, while assets of equity-linked saving schemes (ELSS) dipped by 1.8% (by Rs 452 crore) to Rs 24,183 crore, due to mark-to-market loss. Net inflow into the industry stood at Rs 46,721 crore in October 2012 as against net outflow of Rs 51,908 crore in September 2012.

More than 25 lakh equity folios have dropped in the last six months when the Sensex gained more than 2000 points. After reaching a peak of 4.11 crore folios in March 2009, equity folios have been falling relentlessly since 2009. The latest data published by SEBI for the period April 2012-October 2012 shows that the industry saw a drop of 25.77 lakh folios. The total investor count in equity funds stands at 3.50 crore now. While AMCs are witnessing redemptions in equity funds, the debt category is seeing a healthy rise in investor accounts. More than five lakh folios have been opened in debt funds in the last six months.

Piquant Parade

The board of Daiwa Mutual Fund, the Indian asset management arm of Japan's Daiwa Securities Group, will sell its schemes but may retain the mutual fund licence. The group has decided to adopt a 'scheme transfer' method to exit its domestic fund business. The Daiwa board has chosen to cut down India exposure amid "difficult business conditions"; instead, it will focus resources on the group's overseas fund management and advisory business. Though Daiwa may exit its domestic fund business, it will continue to have a toehold in India to manage the asset manager's offshore funds and advisory business. The Japanese asset manager has offshore portfolios worth $275 million, down about $525 million from peak levels. Daiwa Mutual Fund started its India operations in 2010 when it acquired the fund assets of the Shinsei Bank-owned Shinsei Asset Management Company.

The Aditya Birla group, led by Kumar Mangalam Birla, has taken charge of its mutual fund joint venture with Sun Life Financial of Canada by buying 1% stake from the latter. The Birlas will now own 51% stake in Birla Sun Life Asset Management Co. Ltd. and Sun Life will be left with 49%. The Birlas and Sun Life had set up the mutual fund venture in 1994. Since then, it has grown into one of India’s leading mutual fund companies, with assets under management of Rs 72,900 crore as of September 2012, growing at an annual rate of 8.5%.

Fair trade regulator, Competition Commission of India (CCI), has approved Religare group's 49% stake sale in its mutual fund business to global investment management firm Invesco. According to the deal, reached in September 2012, US-based Invesco is acquiring 49% stake in Religare Asset Management Company and Religare Trustee Company Pvt Limited, which manage assets worth over Rs 14,600 crore for Religare group's mutual fund business. Invesco is acquiring the stake through a group entity, Invesco Hong Kong Ltd, from Religare Securities Ltd. and the deal is estimated to have valued Religare group's mutual fund business at about Rs 1,000 crore.

Regulatory Rigmarole

AMFI has reduced the registration fees for mutual fund distributors to increase the penetration of mutual funds and motivate distributors to look beyond the metros. The revised fee will be applicable from November 1, 2012. First time Individual Financial Advisors (IFAs) will now have to pay only Rs 3,000 for registration, compared with Rs 5,000 earlier. Even the renewal fees for existing IFAs are reduced to Rs 1500 from Rs 2500 earlier. In August 2012, SEBI created a new category of distributors, which includes individuals like senior citizens, postal agents, retired teachers, and other retired government officials who have been in service for at least 10 years in their respective organisations. The fee for this category has been fixed at Rs 3,000 per person. The registration fee for NBFCs has been reduced by 80% from Rs 5 lakh earlier to Rs 1 lakh now and the renewal fee from Rs 2.50 lakh to Rs 50,000 now. Earlier all types of banks, be it private, or co-operative had to pay Rs 5 lakh as registration fee. Now, AMFI has introduced a separate category for regional rural banks, district central co-op. banks that have to pay Rs 1 lakh for getting mutual fund distribution license. This reduction in fee will lead to higher number of distributors entering in Tier-2 and Tier-3 cities, which will benefit the industry over a period of time.

Market regulator SEBI allowed mutual funds to participate in Credit Default Swap (CDS) transactions, which allow business entities to hedge risks associated with the bonds market. Besides, mutual funds could invest in repo or short-term repurchase of forward contract of corporate debt securities having ratings of AA and above that. Mutual funds can participate in the CDS market for hedging their debt risks, but cannot enter into short positions in the CDS contracts. Mutual funds are required to disclose the details of CDS transactions of the scheme in corporate debt securities on the monthly as well as half yearly basis. 

If you have already invested in any particular fund house and now wish to invest in another fund house where you have not invested before January 1, 2012, then you will have to complete the KYC formalities again by filling up the new KYC form implemented after January 1, 2012. From December 1, 2012, certain additional information needs to be submitted as well as ‘in person verification’ (IPV) needs to be completed for further investments in any mutual fund (other than the one in which the investors have already invested). The revised KYC form before January 1, 2012 for individuals has additional provision for details such as father's / spouse name, marital status, nationality, gross annual income / net worth details and in-person verification. The revised KYC form can be used for changing contact details like address, email id and phone no. Hence, existing individual investors who are know your client (KYC) registered prior to January 01, 2012 through CDSL Ventures Ltd (CVL) and who wish to invest in any new mutual fund / through capital market should complete the additional KYC requirements/provisions (as mentioned above) using the KYC Details Change Form on or before November 30, 2012.

Market regulator SEBI allowed mutual fund houses to levy certain amount of brokerage and transaction costs on investors with regard to execution of trades. In a circular, the regulator said that fund houses can levy brokerage and transaction costs, with a ceiling of 0.12% for cash market transactions and 0.05 for derivatives dealings.

Karvy has recently released an India Wealth Report 2012 that gives an update on individual wealth in India. According to the report, the individual investors’ investment in mutual fund increased to Rs 3.11 lakh crore from Rs 2.84 lakh crore in FY 11. Debt-oriented funds grew by 17.2% while equity-oriented funds grew by 2% compared to last year. The individual wealth in the country grew to Rs 92.26 lakh crore as on March 2012 from Rs 86.5 lakh crore the previous year. The total individual wealth in India is expected to double to Rs 179 lakh crore in the next four years from the current Rs 92.26 lakh crore.

NFO NEST

November 2012

Spate of  IDFs in the offing

The creation of Infrastructure Debt Funds (IDFs) was announced in the Union Budget 2011-12 to facilitate long term financing for the infrastructure sector. IDFs can be created in two ways - as a trust by AMCs and as a company by NBFCs. The RBI will regulate IDFs launched through NBFCs while SEBI will oversee IDFs of AMCs. In March 2012, LIC, Bank of Baroda, Citicorp Finance, and ICICI Group signed a memorandum of understanding (MOU) to set up India’s first infrastructure debt fund through the NBFC route. IDBI Mutual Fund, IDFC Mutual Fund, Birla Sun Life Mutual Fund, ICICI Prudential Mutual Fund, Reliance Mutual Fund, SBI Mutual Fund, L&T Mutual Fund, Srei Mutual Fund, and Axis Mutual Fund have submitted their offer documents to SEBI to launch IDFs. So far, only IDFC Mutual Fund and Srei Mutual Fund have received SEBI nod to set up their IDFs.

Only one capital protection-oriented fund finds its place in the November 2012 NFO NEST.

Sundaram Capital Protection-oriented Fund – Series IX

Opens: November 16, 2012

Closes: November 30, 2012

Sundaram Capital protection-oriented Fund – Series IX is a close-ended fixed income fund with a partial equity orientation. This fund is the latest in a series of similar hybrid close-ended funds by Sundaram Mutual Fund, ninth as far as three-year tenured ones are concerned. The fund will invest 80-100% in debt securities and up to 20% in equities. Debt portfolio will mainly be in triple-A-rated non-convertible debentures (NCDs) and if enough of these are not available, then in bank certificate of deposits (CDs) of public-sector banks. Securitised debt and securities of four sectors – real estate, micro finance, airlines, and information technology – will not be invested in. Equity portion will be re-balanced on a dynamic basis. The fund is benchmarked to CRISIL MIP Blended Index.

Union KBC Trigger 50 Fund – Series 1 and 2, DSP BlackRock Constant Maturity 10Y Bond Fund, DSP BlackRock Constant Maturity 10Y G–Sec Fund, IDFC League 1 Fund, IIFL Dynamic Bond Fund, Motilal Oswal MOST Prime Equity Fund, ICICI Prudential Infrastructure Debt Fund, ICICI Prudential Dividend Yield Equity Fund, JP Morgan India Income Opportunities Fund, DSP BlackRock Cash Manager Fund, Birla Sunlife Infrastructure Debt Fund Series A & B, and DSP BlackRock Ultra Short Term Fund are expected to be launched in the coming months.

GEM GAZE

November 2012

With the postponement in the implementation of DTC coupled with the infusion of life in the stock market, all the funds that adorned the November 2011 GEMGAZE have retained their pre-eminent position in the November 2012 GEMGAZE also and the honeymoon continues...

Magnum Taxgain Fund Gem

Grand old diversified dad 

SBI Magnum Taxgain is one of the oldest and largest tax-saving ELSS schemes in the country with an AUM of Rs 4648 crore. An interesting feature of the fund is its stock picking which is more inclined to companies that have disproportionately large market share, with 75% of the funds in large cap stocks. For a fund with a massive asset size, SBI Magnum Taxgain's portfolio is well diversified to incorporate an average of about 50 stocks across sectors. The top 5 holdings account for 26.25% of the portfolio. The top three sectors that the fund invests in are finance, energy, and technology sectors, with an exposure of 24%, 12%, and 11%, respectively. One-year return of the fund is 14.5% as against the category average of 10.74%. The expense ratio is 1.81% and the portfolio turnover ratio is 29%.

HDFC Tax Saver Fund Gem

Temporary lull

At Rs 3224 crore, it is the second largest ELSS fund in the industry. With the exception of 2007, the fund has done well in falling as well as rising markets. HDFC Taxsaver takes contrarian bets but its performance history speaks for itself. HDFC Taxsaver tends to take a top-down approach before going for potentially outperforming stocks. But in this strategy, it could well deviate from the current market position. With no bias towards any market cap, this fund is a great multi-cap offering with a long history of impressive performance. Currently, large caps account for 56% of the portfolio. The rising asset base has led to an increase in the number of stocks to 62. With the top 5 holdings accounting for 24%, the fund looks well diversified. The expense ratio is 1.85% and turnover ratio is 20.58%. The fund's lower turnover implies that it adopts a buy and hold strategy. In the past one year, the fund has earned a return of 7.46% as against the category average of 10.74%. Many tax saving funds have taken a deep cut in their NAV during bear markets, owing to their mid-cap focus. HDFC Tax Saver, though, has learnt from past lessons and has increased its large-cap exposure. However, it holds more mid-cap stocks when compared with Fidelity or Canara Robeco's tax-saving schemes, which have a clear large-cap focus. Although the fund gradually reduced its exposure to under performing capital goods in the past year it continues to allocate 6% of the assets to the sector. But it still is a strong holding…With a three-year compounded annual return of 27%, it beat the category average of diversified equity funds by 5 percentage points. Over a five-year period, it clocked compounded annualised return of 5.6% and bettered its benchmark CNX 500 by 2.6 percentage points.

Sundaram Tax Saver Fund Gem

Change at the helm of affairs

There has been a recent fund manager change at Sundaram Tax Saver Fund. Manager and head of equities Satish Ramanathan relinquished portfolio management duties of this fund in Jan 2012. He continues to serve as the head of equities at Sundaram and oversees the investment function. The fund is now jointly managed by managers, Srividhya Rajesh and J. Venkatesan. Both managers are old hands at Sundaram and share roughly eight years of portfolio management experience between them. Otherwise, the investment approach remains largely unchanged: The portfolio’s sector weights are loosely aligned with those of the benchmark index BSE 200 with maximum deviations at +/- 8% (absolute), a change that was implemented in early 2011 due to the fund’s ordinary showing in the 2009-10 periods. However, like before, stock selection is independent of benchmark weights, with the managers choosing stocks based on their conviction. Taking cash calls remains integral to the strategy, with the managers increasing cash levels during market downturns or when there is a dearth of investment opportunities. The managers also take contrarian bets when they believe valuations are attractive. In the last couple of years, the fund has seen its AUM increasing substantially from around Rs 480 crore to more than Rs 1,378 crore. Top five holdings constitute 21% of the portfolio with a total of 53 stocks, with 52% of the portfolio invested in large-cap stocks. Energy, finance, and FMCG are the top 3 sectors. The fund follows both top-down and bottom-up approach for making investments. Its one-year return has been 13.78% as against the category average of 10.74%. The expense ratio is 1.96% and the portfolio turnover ratio is 133%.

Canara Robeco Equity Tax Saver Fund Gem

Stands out in the crowd

Canara Robeco Equity Tax Saver’s focus on growth-oriented companies has made it stand out in the crowd. Going by its performance over the past five years, consistency is what stands out, whether in a bull market or a bear one. This Rs 456 crore fund has been pretty successful in utilising the agility that a small fund offers by spotting opportunities and capitalising on them. There are 55 stocks in the portfolio. Allocation to the top 5 holdings (24%) is in line with the category average. The massive out performance though has been possible as a result of 20% holding in mid cap stocks. One-year return is 13.15 % as against the category average of 10.74%. The expense ratio is 2.32% and portfolio turnover ratio is 39%. It has been following a defensive strategy of being overweight on sectors such as pharmaceuticals and fast moving consumer goods and underweight on rate-sensitive sectors. This explains its 12% return in the last five years, when the Sensex delivered –2% and mid- and small-cap indices -3 % and -5 %, respectively. The fund's strategy of investing in companies that have less debt and good operating cash flows has worked for it. With a return since launch of around 14.5% and a below average risk grade, this has given decent returns. The fund manager ensures a diversified portfolio with no market cap or sector bias.

Religare Tax Plan Gem

Consistent performer

The fund's ability to provide downside protection accompanied with decent returns during markets rallies help investors over the long run. The risk of investing in this fund lies in its aggressive sector bets. With a corpus size of Rs 120 crore, Religare Tax Plan is one of the smallest schemes in its category, but it packs in quite a punch. The top three sectors are finance, energy, and FMCG. The fund invests across market capitalisation and sectors and spreads its assets over 20-50 stocks without being overly diversified and the top 5 holdings constitute 27%. At present, large cap stocks make up 59% of the portfolio. The one-year return is 10.8% as against the category average of 10.74%. The expense ratio is 2.48% and the portfolio turnover ratio is 44%.

DSPBR Tax Saver Fund Gem

Not for the faint-hearted

DSP Black Rock Tax Saver gets hit harder during bad times, but bounces back impressively in rallies. This fund is not for the faint hearted. Thanks in part to its tilt towards mid and small caps it gets hit harder during market turmoil, 2008 being a case in point. Despite exposure to FMCG and Healthcare and a high cash allocation, it lost more than the average. But it bounces back during rallies and over time the long-term performance is good. A sensible choice for the slightly adventurous, who are comfortable with a not-so-smooth ride. There was a change of guard at this fund’s helm of affairs in July 2012. Manager Anup Maheshwari has relinquished portfolio management duties (he continues to wield significant influence in the overall investment function given his role as the head of equities at DSP BlackRock) and  the fund is managed by Apoorva Shah, an experienced manager who has been with the fund company since April 2006. The investment process remains unchanged: The fund continues to follow a flexi-cap approach wherein the focus is to generate superior returns over a three-year period by moving across sectors and market caps in an unconstrained manner. The stock-picking is rooted to a bottom-up approach, where the main focus is on picking growth-styled stocks. Moreover, investors should note that the decision to invest substantially in small/mid-caps and take big sector bets can lead to higher downside risk in market corrections. Also, the manager’s decision to avoid taking cash calls is a positive, but it could result in the fund relatively under performing peers who get their cash calls right. Indeed, the fund tends to fare poorly in bear markets (2008 and 2011 are cases in point) due to the above-mentioned factors. That said the approach is likely to pay off in rising markets. DSPBR Tax Saver has a fund corpus of around Rs 729 crore. It has a growth-oriented multi cap portfolio with 61% of the corpus in large cap stocks. There are 94 stocks in the portfolio. DSP BR Tax Saver fund has offered 15.74% returns for the last one year as against the category average of 10.74%. The expense ratio is 2.21% and the portfolio turnover ratio is 130%.

FUND FLAVOUR

November 2012

Uncertainty looms large…

Death and taxes are the only two things that are certain in life. But uncertainty looms large over Equity-linked Savings Scheme (ELSS), which offers both tax breaks and total exposure to equities. Sales of tax-saver mutual funds was Rs 1,106 crore in the March 2012 quarter, 34.7% lower than the same period in 2011, according to AMFI data. This has been the worst March quarter show for tax saver funds in seven years. According to AMFI, tax savings schemes as a category has seen net outflows of Rs 934 crore in the half year ended September 30, 2012. Across 49 schemes, Rs 24,635 crore worth of assets are under management in this category.  New investors are not keen to invest in these funds as they have attractive options such as public provident fund offering 8.8% returns to save tax. As existing investors are logging out and new investors are not keen to invest, these funds have been experiencing net outflows. The uncertainty over the fate of the ELSS category under the new Direct Taxes Code (DTC) regime and the lacklustre show by equity markets impacted sentiments, driving down investments.

Let us start with the simple part first… the tax benefit.

When you buy an ELSS fund, you are allowed to reduce your taxable salary by the amount you invest (subject to certain limits), and since your taxable salary is reduced, your tax liability is also reduced. There are no other tax benefits of investing in this type of mutual fund. So, if you bought ELSS Fund this year and benefited from the tax breaks, it does not matter if those tax benefits are withdrawn next year because you would not get any deductions on your existing funds next year even if Section 80C were to remain in place. So far, so good, but the tax structure today favours equity funds since there are no long term capital gains on them, and there are no dividend distribution taxes on them either. There is a short-term capital gains tax of 15% if you sell an equity fund within a year but since these funds have a lock in period of 3 years, you would never incur a short-term capital gains tax on them. Now, the zero long term capital gains, and no tax on dividends is because these funds invest in equity, and if these rules were to be changed in the future for all equity funds then such rules will be applicable on ELSS funds as well. The difference from your perspective is that while you can get rid of the other equity funds if you do not like the new taxes, you cannot get rid of ELSS funds since they have a lock-in period.

So should that turn you away from investing in an ELSS fund?

This alone is not a valid reason because the tax treatment on long-term capital gains could change today without DTC coming in, and you would still be stuck with your existing ELSS funds. Some people are concerned that the sole reason investors opt for ELSS funds are tax savings, and if that is withdrawn then would these funds not gradually shrink in size, and what is the incentive for the fund house to focus on the performance of these funds and would they even continue with them? So while this is a heated topic in the corridors of personal finance and there are arguments flying thick and fast, invest if you want to do so from a tax saving perspective. An icing on the cake could be the dividends which some of them have delivered – approximately between Rs 1 to 3 per unit. Do not worry about the imminent looming divorce between DTC and ELSS… enjoy the honeymoon while it lasts.

A case for ELSS investment

Do not shun your ELSS just because of depressed stock market or better returns in PPF, and five-year FDs. Always remember that equities are risky and you should have at least a time frame of five to seven years. If you have earmarked money for the stock market, you can still go ahead with your investments. If you are investing for the first time in equities, be cautious as the market is going through a rough period. Do not let the confusion on implementation of DTC and the status of ELSS in the new regime bother you. Equities can still earn you superior returns in the long-term. The best ELSS Fund has returned over 13% in the last five years.

Be systematic and plan ahead

Most salaried taxpayers awaken to tax planning only in December when the accounts department at the office rings the alarm bell for proof of tax saving investments. A few calls / visits to tax planners, insurance agents and postal savings agents later, the immediate objective of investments and proof submission is met. However, no attempt is made to understand the tax planning process thoroughly. As such, individuals end up investing in avenues, which may not necessarily map out their long-term financial goals. At that point, saving tax is the objective and not investment. An analysis by CRISIL suggests that it is possible to do both tax planning and long term financial planning together. Further, if one is willing to take some risks, ELSS offered by mutual funds provides an opportunity to generate attractive long-term returns, if invested for longer period (more than five years). Ideally, one must follow a comprehensive financial planning model, which includes tax planning along with risk profiling, goal setting, and asset allocation. This not only lends a long-term perspective to tax saving investments but also indulges in a disciplined approach to tax planning. Importantly, tax planning should be a yearlong exercise and not a blink-of-an-eye moment. It helps in planning the monetary outflows for the entire year instead of making lump sum contributions at year-end. It also gives investors adequate time to understand and evaluate different investment options.

This is how Mutual Fund ELSS stands out of the crowd... 

Investors generally prefer traditional debt instruments for tax saving. While these may provide safety and stability, they fall short of generating higher inflation adjusted returns over the long run. For example, instruments earning 9% rate of interest when average inflation is around 9% will yield 0% real rate of return. Hence, investors willing to take some amount of market risk may look at equity linked investments via mutual funds for the long term. This asset class has historically provided high returns over longer periods. The S&P CNX Nifty has returned over 16% in the 10-year period ended December 30, 2011, almost double compared with around 8-10% yielded by tax saving debt instruments. Among equity tax saving instruments, ELSS, ULIPs, and the equity option of the NPS are available for investment. The lock-in period for ELSS is three years, for ULIPs, it is five years, and NPS, has a lock-in period till 60 years of age.

Points to ponder... 

Before deciding to go for mutual fund ELSS, here are some points to ponder over. First check your overall portfolio. Does it need more equity exposure? If yes then you can go for ELSS; if no then you can go for PPF or NSC.  Second thing is to keep in mind that equity investments are for long term, say 5 years or more. Though the lock-in period in ELSS is 3 years it is better to invest with a time horizon of 5 years or more. Moreover, investors need to keep in mind that SIP is the best form of investing in mutual funds and ELSS is not an exception. So a SIP in ELSS is a good strategy to be followed. The poor performing ELSS has given around 10% annualized return in the last 5 years whereas the best performing ELSS has delivered around 25% annualized return in the last 5 years. So investors need to be careful in choosing the right ELSS scheme. Past performance, risk adjusted return, consistency are a few parameters to be evaluated in selecting a best performing ELSS scheme. All together 49 Equity Linked Saving Schemes are available in the market. Of these, 37 funds are open-ended funds, of which 30 funds have a track record of 3-years or more. Only 14 funds out of 30 managed to beat the category average in the 3-year period. So selecting a right fund is more important, as the money is going to be locked in for 3 years. Equity Linked Saving Schemes have a good track record, with performance similar to diversified funds. The category average returns on 3-yr, 5-yr, 7-yr, and 10-yr are 22.23%, 5.20%, 15.41% and 22.17% CAGR respectively. However, market slumps in recent times have hit the performances of equity-oriented funds including ELSS. 

The verdict... 

Hence while ELSS mutual funds offer good opportunities for long-term wealth creation (while you intend availing a benefit under section 80C) it is imperative that you complement your financial planning exercise with your tax-saving (by considering the aspects of age, income, risk appetite and financial goals) as this would enable in making a prudent investment decision. Moreover, please do not wait till the eleventh hour as this may lead you to making a wrong choice. While considering an ELSS mutual fund for your market-linked tax-saving portfolio, give importance to those ELSS mutual funds that have completed at least 3 years of track record and select schemes from mutual fund houses which follow strong investment systems and processes. Look for the consistency in the performance, with relevance to risk and returns, portfolio turnover ratio expense ratio, and the portfolio of ELSS mutual fund(s). We all love ELSS mutual funds because they help us save taxes and at the same time give better returns that conventional tax saving instruments. Though there is a lock-in period of 3 years with ELSS mutual funds, which is usually not applicable for other Equity mutual funds, but then one should not invest in equity or equity linked instruments for a time horizon lesser than that. ELSS helps in infusing a sense of discipline towards holding one's investments for the long-term.