Thursday, January 3, 2013

Best Tax Saving Mutual Funds 2012

With the time for investing in tax saving instruments upon us, I thought it would be interesting to look at the best tax saving mutual funds or ELSS funds for 2012. Ideally, one should make these investments throughout the year by means of SIP or STP and not as a lump sum amount at the end of the year. Following are the list of top ELSS funds for 2012, along with their last one year returns as on January 2, 2013.

Principal Tax Savings 48.60%
Reliance Tax Saver 47.19%
DSPBR Tax Saver 42.02%
HSBC Tax Saver 41.46%
ICICI Prudential Tax Plan 38.42%

So far, so good. All these funds have done an amazing job in the past one year. So, its easy to choose the best funds to invest in, right? If only investing were that easy.

Principal Tax Savings Fund, the top performing fund of 2012 with an annual return of 48.60%, is actually one of the worst performing tax saving funds in the last five years, with an annualized return of -7.27%! Its ranked 27 out of 29 funds for the five year time period. 

While choosing funds, it is important that one looks at the larger time frame, which should ideally be encompassing one complete investing cycle. You want your fund not only to be making the most of good times but also to be solid in defense. Keeping this point in mind, here are the top five tax saving mutual funds of last five years along with their five year annualized return.

Canara Robeco Tax Saver Regular  6.59%
Franklin India Taxshield 4.31%
L&T Tax Advantage 3.74%
ICICI Prudential Tax Plan 3.67%
HDFC Tax Saver 3.62%

If you have any questions regarding mutual funds or want you mutual fund portfolios analyzed, feel free to mail me at positiontrader @ (no gaps).

Take care and good luck!

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