What is mutual fund?

Working of Mutual funds

Why do people use mutual fund?
Portfolio Diversification Professional Management Reduction / Diversification of Risk Liquidity Convenience and flexibility Safety

Classification of Mutual funds

Portfolio Ownership basis Schemes basis basis Income Open Ended Funds Closed Ended funds Interval funds Equity Balanced Growth Bond Specialized Leverage Taxation Money market Index

Location basis


public sector Mutual fund Private sector Mutual fund

Domestic funds Offshore Funds Fund to funds

Type of returns
‡ Income earned from dividends on stocks and interest on bonds ‡ Capital gain ‡ Gain arising out of profit after selling

Equity Linked Saving Schemes

Equity linked saving schemes
‡ This scheme offers mutual funds as combination of diversify equity and tax benefits. ‡ For this schemes lock in period is 3 years ‡ As per Income Tax Act sec 80 c investment upto 1 Lac is eligible for deduction from gross total income.

Equity linked saving schemes
‡ After 3 years lock in period the fund amount remains invested but scheme works like open ended scheme ‡ The investor can take amount back after 3 years ‡ These are high risk and high return instruments ‡ The top 5 ELSS funds have given returns from 22% to 26% compounded annually over five years, ‡ The return (maturity and dividend) is exempted is tax free under present EEE regime (Exempt-Exempt-Exempt) ‡ Most fund houses start an ELSS regular investment with 500Rs. And single investment starts at 5000rs.

Example Example
Total Annual Income

Investment in ELSS Gross Taxable income



Benefits of ELSS
‡ Tax benefit for is open all individuals irrespective of total income ‡ the 3 year lock in period ‡ Allows fund managers to plan long term strategy ‡ the performance looks even better than that of diversified equity funds ‡ Some ELSS offers additional benefit of life insurance personal accident death insurance cover. Eg: Birla Sun life Tax relief, HSBC Tax saver Equity ‡ Tax free dividend and tax free long term capital gains ‡ Potential for higher returns

ELSS With other Instruments

‡ SIP¶s are a tried and tested method of minimizing risk and yet enjoying good returns, by regular, periodic investment, over a long horizon. ‡ Investor gets benefit of fluctuations in stock market ‡ Healthy saving habits ‡ A benefit of rupee cost averaging ‡ Minimum amount needs just Rs.500 per month

Returns of Schemes
Year First Five Third Seven Ten Average Fund 84.81 6.55 18.20 30.45 12.92 Best fund 126.26 18.02 26.75 44.67 23.81 Worst fund 52.20 (3.35) 8.79 19.14 3.46
Return in percentage

Returns of top 10 ELSS
Rank 1 2 3 4 5 6 7 8 9 Scheme Name Canara Robeco Equity Taxsaver - Growth Bharti AXA Tax Advantage Fund - Eco - Growth Bharti AXA Tax Advantage Fund - Regular - Growth L&T Tax Advantage Fund Series I - Growth Bharti AXA Tax Advantage Fund - Eco - Dividend Bharti AXA Tax Advantage Fund - Regular - Dividend L&T Tax Advantage Fund Series I - Dividend Quantum Tax Saving Fund - Growth Quantum Tax Saving Fund - Dividend Since Inception(returns) 85.09 77.72 77.32 73.96 73.7 73.55 69.35 59.92 59.89