MUTUAL FUNDS
Equity Linked Saving Schemes
Equity Linked Saving Schemes
Investors are well aware of instruments like PF, LIC, PPF, ULIPS, ELSS or Equity Linked Savings Schemes, as they offer rebate U/S 80CC of the IT Act. Amongst all these instruments ELSS stands out as a smart and efficient way of saving tax and creating wealth. It is worth noting that none of the other tax saving instruments have ever delivered double-digit returns. Whereas, historically ELSS has given returns in high double digits.
Equity Linked Saving Schemes (ELSS) is Similar to any diversified equity mutual fund that invests in equity markets. In nutshell, ELSS is a closed ended mutual fund that offers tax benefits plus capital appreciation. ELSS schemes are generally locked in for a period of 3 years from the date of investment.
Features of ELSS (Equity Linked Saving Schemes)
- Normally a closed ended diversified equity mutual fund.
- Lock in period is if 3 years and premature withdrawals are not allowed under any circumstances.
- Provides capital appreciation and tax benefits.
- An investor can invest in ELSS through the sip route as well. However, the point to be noted is that in SIP, lock in period of 3 years is calculated from the date of each SIP investment and not from the date of start.
- Minimum investment amount in ELSS for a lump sum is Rs. 5,000 and for SIP is Rs. 500.
- Investors can opt for dividend option and get regular yearly dividends.
Why invest in ELSS
- Returns (including dividends) under sec 80CC is all tax free.
- Lock in period of NSC is 6 years, PPF is 15 years, whereas, lock-in period of ELSS is 3 years.
- Historically ELSS has given better returns than PPF, NSC, and ULIPs.
- All returns are tax free after 3 years.
- A 3-year lock in period enables the fund Manager to invest in fundamentally strong shares with huge future potential and upside.
Performance of the Top ELSS Schemes
| Scheme Name | Category Name | Crisil Rank | AUM (Cr) | 1 M | 6 M | 1 Y | 3 Y | 5 Y |
|---|---|---|---|---|---|---|---|---|
| Quant Tax Plan - Growth | ELSS | 5 | 554.93 | 3% | 14% | 59% | 35% | 26% |
| PGIM India Long Term Equity Fund - Growth | ELSS | 4 | 330.03 | 6% | 16% | 38% | 22% | 18% |
| Mirae Asset Tax Saver Fund - Regular Plan - Growth | ELSS | 4 | 10,086.74 | 3% | 12% | 35% | 25% | 22% |
| Axis Long Term Equity Fund - Growth | ELSS | 3 | 33,529.42 | 3% | 13% | 26% | 22% | 20% |
Performance of the top schemes
Performance of the top schemes
Scheme Name | Category Name | Crisil Rank | AUM (Cr) | 1 M | 6 M | 1 Y | 3 Y | 5 Y |
| Canara Robeco Bluechip Equity Fund - Regular Plan - Growth | Large Cap Fund | 5 | 5,208.28 | 4% | 11% | 26% | 22% | 19% |
| LIC MF Large Cap Fund - GrowthLarge Cap Fund | Large Cap Fund | 3 | 627.54 | 4% | 14% | 26% | 19% | 16% |
| Tata Large Cap Fund - Regular Plan - Growth | Large Cap Fund | 3 | 1,074.43 | 4% | 12% | 32% | 18% | 15% |
Scheme Name | Category Name | Crisil Rank | AUM (Cr) | 1 M | 6 M | 1 Y | 3 Y | 5 Y |
| Mirae Asset Emerging Bluechip Fund - Growth | Large & Mid Cap Fund | 5 | 21,230.60 | 3% | 13% | 38% | 26% | 23% |
| Edelweiss Large and Mid Cap Fund - Regular Plan - Growth | Large & Mid Cap Fund | 4 | 1,057.12 | 4% | 12% | 35% | 22% | 19% |
| LIC MF Large & Mid Cap Fund - Growth | Large & Mid Cap Fund | 3 | 1,500.84 | 4% | 16% | 35% | 21% | 18% |
| Canara Robeco Emerging Equities - Regular Plan - Growth | Large & Mid Cap Fund | 3 | 11,734.12 | 4% | 14% | 36% | 24% | 20% |
Scheme Name | Category Name | Crisil Rank | AUM (Cr) | 1 M | 6 M | 1 Y | 3 Y | 5 Y |
| PGIM India Midcap Opportunities Fund - Growth | Mid Cap Fund | 5 | 3,584.78 | 6% | 21% | 58% | 37% | 24% |
| Tata Mid Cap Growth Fund - Regular Plan - Growth | Mid Cap Fund | 3 | 1,455.57 | 3% | 13% | 37% | 24% | 19% |
| Axis Midcap Fund - GrowthMid Cap Fund | Mid Cap Fund | 3 | 16,107.43 | 3% | 15% | 38% | 26% | 24% |
| Invesco India Mid Cap Fund - Growth | Mid Cap Fund | 3 | 2,059.46 | 4% | 14% | 39% | 24% | 20% |
Scheme Name | Category Name | Crisil Rank | AUM (Cr) | 1 M | 6 M | 1 Y | 3 Y | 5 Y |
| Quant Small Cap - Growth | Small Cap Fund | 5 | 1,270.60 | 7% | 16% | 90% | 39% | 23% |
| Union Small Cap Fund - Growth | Small Cap Fund | 4 | 564.02 | 6% | 16% | 60% | 31% | 20% |
| Axis Small Cap Fund - Growth | Small Cap Fund | 3 | 7,695.32 | 4% | 17% | 54% | 33% | 24% |
| Sbi small cap fund - Growth | Small Cap Fund | - | 10878.18 | 2% | 13% | 42% | 28% | 24% |
Scheme Name | Category Name | Crisil Rank | AUM (Cr) | 1 M | 6 M | 1 Y | 3 Y | 5 Y |
| PGIM India Flexi Cap Fund - GrowthFlexi Cap Fund | Flexi Cap Fund | 5 | 2,888.23 | 4% | 15% | 42% | 30% | 22% |
| Canara Robeco Flexi Cap Fund - Regular Plan - GrowthFlexi Cap Fund | Flexi Cap Fund | 4 | 6,167.90 | 4% | 14% | 33% | 23% | 20% |
| Quant Flexi Cap Fund - GrowthFlexi Cap Fund | Flexi Cap Fund | - | 39.3 | 2% | 10% | 56% | 32% | 24% |
| Parag Parikh Flexi Cap Fund - GrowthFlexi Cap Fund | Flexi Cap Fund | - | 18,298.80 | 1% | 16% | 44% | 30% | 23% |
| Quant Active Fund - Growth | Multi Cap Fund | 5 | 1,459.13 | 2% | 15% | 54% | 33% | 26% |
Scheme Name | Category Name | Crisil Rank | AUM (Cr) | 1 M | 6 M | 1 Y | 3 Y | 5 Y |
| Quant Tax Plan - Growth | ELSS | 5 | 554.93 | 3% | 14% | 59% | 35% | 26% |
| PGIM India Long Term Equity Fund - Growth | ELSS | 4 | 330.03 | 6% | 16% | 38% | 22% | 18% |
| Mirae Asset Tax Saver Fund - Regular Plan - Growth | ELSS | 4 | 10,086.74 | 3% | 12% | 35% | 25% | 22% |
| Axis Long Term Equity Fund - Growth | ELSS | 3 | 33,529.42 | 3% | 13% | 26% | 22% | 20% |
Large Cap Funds
Large Cap Funds
In large-cap fund is a fund where minimum 80% of the corpus is invested in well-established companies with large market capitalization. These funds are safer and have low volatility. Stocks, where these funds invest in are called large cap stocks. Examples of large cap stocks are HDFC, HDFC Bank, TCS, reliance Industries, etc. Well established large corporations that may be part of the large cap index (BSE-30, NIFTY-50, BSE TOP 100 etc) comprise large cap universe. Large cap stocks also have track record of consistent growth and a dividend payout.
Large cap funds usually provide stable returns and known to provide stability to a portfolio. As per a recent SEBI circular. large cap funds need to invest a minimum of 80% of the corpus in large cap stocks. And large cap stocks are top 100 stocks as per market capitalization.
Following are the examples of a few large cap funds:
- Franklin India bluechip fund
- Birla sun life frontline equity fund
- ICICI Prudential focused bluechip fund
- Mirae Asset India equity fund
- Large-cap funds are ideal for investors who are not savvy with market nuances but still would like to gain from the stock market. However, first time investors need to be cautious even with large cap funds. Ideally, they may try investing through SIP and as they get used to equity investing they may invest lump sum.
Performance of the Top Large Cap Funds.
| Scheme Name | Category Name | Crisil Rank | AUM (Cr) | 1 M | 6 M | 1 Y | 3 Y | 5 Y |
| Canara Robeco Bluechip Equity Fund - Regular Plan - Growth | Large Cap Fund | 5 | 5,208.28 | 4% | 11% | 26% | 22% | 19% |
| LIC MF Large Cap Fund - GrowthLarge Cap Fund | Large Cap Fund | 3 | 627.54 | 4% | 14% | 26% | 19% | 16% |
| Tata Large Cap Fund - Regular Plan - Growth | Large Cap Fund | 3 | 1,074.43 | 4% | 12% | 32% | 18% | 15% |
Mid Cap Fund
Mid Cap Fund
When a scheme invests minimum 65% in mid cap companies, the fund is called Mid-cap fund. As per recent categorization is done by SEBI, Mid cap stocks are stocks that rank between 100-250 in terms of market capitalization. As compared to large-cap funds, Mid-cap funds are volatile but also have the potential to deliver great returns. Mid cap funds deliver exceptional returns when stock markets are in a bull phase. However, they should be avoided when markets have already run up for a few years. Period between 2013 and 2018, most mid cap funds have outperformed their large cap peers by at least 3 times. As of May 2018, we at RupeeInvest are not advising mid and small cap funds as they are extremely expensive and have also started to correct.
Small-Cap Fund
When a scheme invests minimum 65% of its asset size in smaller companies then the fund is called a small cap fund. As per recent SEBI categorization entire universe beyond first 250 stocks (as per market capitalization) comprises small cap companies. Small cap funds are very aggressive investment instruments and in case of a market downturn lose wealth extremely fast. Smaller companies also have a liquidity problem hence at times NAV of the scheme is eroded extremely fast. As of May 2018, we at RupeeInvest recommend that small cap funds should be avoided.
A word of caution about small and midcap schemes - May 2018
Retail investors look at the returns of the past few years and start investing. That is exactly what is happening now. Past 4-5 years were a dream run for small and midcap schemes. They have given exceptional returns. At times over 30% CAGR for a period between 2013 and 2018. However, investing in these schemes during current times is extremely risky. This is due to the following reasons:
- Mid and small cap stocks have already run up, much ahead of the earnings.
- The mid and small cap stocks are extremely overvalued.
- Mid and small cap has already started to correct. They have corrected over 25% since March 2018.
- Macros appear challenging in 2018-19.
- With general elections in 2019, a risk of political instability cannot be ruled out.
Performance of the Small & Mid Cap Funds
| Scheme Name | Category Name | Crisil Rank | AUM (Cr) | 1 M | 6 M | 1 Y | 3 Y | 5 Y |
| Quant Small Cap - Growth | Small Cap Fund | 5 | 1,270.60 | 7% | 16% | 90% | 39% | 23% |
| Union Small Cap Fund - Growth | Small Cap Fund | 4 | 564.02 | 6% | 16% | 60% | 31% | 20% |
| Axis Small Cap Fund - Growth | Small Cap Fund | 3 | 7,695.32 | 4% | 17% | 54% | 33% | 24% |
| Sbi small cap fund - Growth | Small Cap Fund | - | 10878.18 | 2% | 13% | 42% | 28% | 24% |
Scheme Name | Category Name | Crisil Rank | AUM (Cr) | 1 M | 6 M | 1 Y | 3 Y | 5 Y |
| PGIM India Midcap Opportunities Fund - Growth | Mid Cap Fund | 5 | 3,584.78 | 6% | 21% | 58% | 37% | 24% |
| Tata Mid Cap Growth Fund - Regular Plan - Growth | Mid Cap Fund | 3 | 1,455.57 | 3% | 13% | 37% | 24% | 19% |
| Axis Midcap Fund - GrowthMid Cap Fund | Mid Cap Fund | 3 | 16,107.43 | 3% | 15% | 38% | 26% | 24% |
| Invesco India Mid Cap Fund - Growth | Mid Cap Fund | 3 | 2,059.46 | 4% | 14% | 39% | 24% | 20% |
Systematic Investment Plan
Systematic Investment Plan
When an investor chooses to invest a fixed amount periodically in a certain fund that is known as SIP. Investments can be monthly or Quarterly. A few Fund houses also accept daily and weekly SIP’s. Hence, SIP is not an investment, it’s a mode of investment.
SIP is a great enabler and SIP is a smart & hassle-free mechanism for investing in Mutual Funds. It disciplines investors to invest a fixed, pre-determined amount.
SIP not only helps you build wealth but also instills the habit of savings. In short, SIP is a simple and smart way of investing in mutual funds. Minimizing risk and creating wealth.
How Does SIP Work?
When you start a SIP investment, your money is invested into a specific mutual fund scheme (decided by you) and gets auto-debited from your bank account. In return, a certain number of units are allotted to the SIP investor. A number of units are based on the current market rate (known as the net asset value or NAV) on the date of the investment.
Each time a debit takes place from the investors bank account, additional units of the mutual fund scheme are purchased ( at the prevailing rates) and credited to the investors mutual fund account (also called a folio number). This is where SIP is magical. It enables investors to buy at all market levels hence averaging smartly. This is exactly why SIP has gained prominence the world over. As it helps in rupee cost averaging. If the markets are down a SIP investor automatically ends up buying more units and vice versa. This feature of SIP creates exceptional wealth in the long run. In fact, steeper the downturn, better are the returns. Though Simple, but SIP is a very powerful concept.
How to Start SYSTEMATIC INVESTMENT PLAN (SIP)
- Check your KYC compliance. If you are not KYC compliant, RupeeInvest will help you complete your KYC formalities.
- Choose an amount you wish to invest. Also, identify the financial objective for investment. You may even invest to save tax, but the wealth created can be used for your child’s higher education.
- Team RupeeInvest will assist you with identifying your financial objectives recommend best-suited schemes to accomplish those objectives.
- Choose a date for investment. This is the date on (or after) which, your account shall get debited with the SIP amount. Fill up the form and team RupeeInvest will do the rest.
- Use features provided by RupeeInvest, like online portfolio viewer and mobile app (available at Google Play Store and ITunes App Store) to regularly monitor your funds. Your RM (Relationship Manager) will update you on changes if any.
Key features of SIP
- Investors can stop a SIP anytime. It normally takes 30 days to start or stop a SIP
- You can increase and decrease the amount of SIP as well. This done by stopping the existing SIP and starting a new one with higher or lower amounts.
- You can change the bank for auto debits.
- You can change the SIP dates as well.
Top SIP Mutual Funds For July 2022
| Scheme (Returns as on Jul 18, 2018) | 6 Months | 1 Year | 2 Years | 3 Years | 5 Years |
|---|---|---|---|---|---|
| IDFC Focused Equity - Regular (G) | -4.3% | 8.2% | 20.6% | 11.2% | 15.0% |
| L&T India Large Cap Fund (G) | -1.5% | 6.6% | 19.8% | 13.7% | 31.9% |
| Principal Dividend Yield (G) | -5.3% | 10.9% | 19.1% | 12.4% | 17.6% |
| Edelweiss Large & Mid Cap (G) | -1.0% | 13.5% | 15.0% | 9.6% | 17.1% |
| Invesco Growth Opportunities Fund (G) | -0.4% | 12.3% | 17.2% | 10.6% | 18.9% |
Systematic Transfer Plan
Systematic Transfer Plan
Transferring a fixed amount from one mutual fund scheme into another scheme is known as STP or Systematic Transfer Plan. STP can be triggered by the investor (or unit holder) to meet one or more financial objective.
1. Regular STP: Normally an STP is used for investing a lump sum money when the market is either volatile or valuations are expensive. An investor with lump sum money is always at a risk if the stock market goes south. One shot investment is at a considerable risk of capital erosion. This is where STP comes in as a great risk mitigation tool. Investors can choose a liquid fund and invest the entire corpus in the liquid fund. Subsequently, the amount can go from liquid fund (Through Systematic Transfer) to the equity fund. This has several advantages. Firstly, Liquid fund invariably gives returns that is more than a regular savings account. Secondly, in case of volatility or a downturn STP investor will end up buying in an equity fund when the NAV is beaten down. Also, the key feature of SIP i.e., rupee cost averaging, works in STP as well.
2. When NAV hits a certain number: Certain AMC’s provide a feature in STP form that enables Investors to shift from one scheme to another in case NAV hits a certain figure. In case of a perpetual bull run, Certain risk averse investors might want to opt out of an aggressive equity scheme and enter a safe debt fund. STP enables an investor to pre-decide the amount to be shifted when the NAV hits a certain number. Alternatively, in case the markets go down, an investor might choose to trigger STP if the NAV falls below a certain number. This is a smart mechanism when an investor might want to transfer funds from a debt fund to an aggressive equity fund in case the markets are down. Subsequently benefitting from the upside when the markets revive.
This is how an investor can make the best use to STP
1. Define your risk appetite and the amount to be invested. Also, define the period for which investment is to be made. Please note that STP works best in case of lumpsum investment.
2. Choose the target funds (normally equity funds) and the liquid funds from the same AMC.
3. Choose the frequency of systematic transfer from source scheme (liquid funds) to target scheme (equity funds).
4. Fill out the form. Make sure that the STP period is neither too short nor too long. Historically, STP works best when the markets have been rising for preceding 2-3 years and valuations are expensive.
5. Regularly monitor the investments. You may alter the schemes or the tenure of STP anytime.
Advantages of STP
- Analogous to SIP: It also works like a Systematic Investment Plan (SIP) as you can invest in a Debt fund and start an STP to an Equity Fund from there.
- Choose an amount you wish to invest. Also, identify the financial objective for investment. You may even invest to save tax, but the wealth created can be used for your child’s higher education.
- Works as Systematic Withdrawal Phase: When markets are expensive, STP works like Systematic Withdrawal Plan because as you can transfer from Equity to Debt.
- Liquidity: Initially, investment is in Debt fund but STP transfers it from Debt to Equity. This makes the complete exit convenient. In case of an emergency, you may exit completely from debt fund. Hence debt portion in an STP acts as a liquid asset (only for a finite period of time though).
When is STP ideal
As already stated, when valuations are expensive and/or market volatile. That is the time when STP is a brilliant decision. Plus, returns on the debt component in STP is any day better than any bank deposit.
When does STP not Work
STP will be futile if markets are either in bear phase or fag end of the bear hug. Bearish markets call for lump sum investment.