I am trying to buy a mutual fund for tax saving this year. Need help in chosing one.
https://mf.zerodha.com/ recommends Axis long term equity fund -growth. Can someone explain me what could be the reason behind recommending this?
I am trying to buy a mutual fund for tax saving this year. Need help in chosing one.
https://mf.zerodha.com/ recommends Axis long term equity fund -growth. Can someone explain me what could be the reason behind recommending this?
https://www.valueresearchonline.com/tax/
No.1 for highest returns in last 3 yrs.
No.1 for highest returns in last 3 yrs.
Highest assets amongst all in the group.
might be the reasons.
One can use a common framework to select funds - be it investing in an ELSS fund (to save tax) or funds to generate long term wealth. The framework will help you filter out the better performing funds from myriad of useless funds.
Some of the things that one should look at while selecting a fund -
1) Asset Management Company (AMC) - Pedigree matters. An AMC company that has been around for a while usually develops good investment management process. An AMC with time tested process is likely to perform better than its peers.
2) CAGR and SIP returns - Agreed past performance does not necessarily guarantee future performance. But in the absence of any other good indicator, looking at past return performance is probably the best. Now, while looking at past returns make sure you look at both CAGR and SIP returns. For example if your time frame is between Jan 2010 to Jan 2015 then find out the CAGR return during this period....and also find what kind of returns you would have enjoyed had you opted to do an SIP in this fund during this period. Higher the return, better is the comfort in investing. Link here explains what CAGR is (refer note 6.7). Use this link To find out the SIP returns of any fund.
3) Expense Ratio - In simple words expense ratio is the equivalent to the brokerage charged by a broking house. Expense ratio is charged by the AMC for managing your funds. Avoid funds with high expense ratio, since a high expense ratio eats into your returns.
4) Fund Manager profile - Make sure the fund manager comes from a good background and experience. Watch his interviews and read his articles. Make sure he/she is grounded and has humility to accept mistakes. Eventually the stability/consistency of the fund's returns largenly depends on this one quality of the fund manager.
5) Risk parameters - Make sure the fund is not too volatile. Volatility is captured by standard deviation, so make sure the standard deviation is reasonable. Also look at the drawdown of the fund - if the draw down is large, then that is a reflection of a the quality of stocks the fund manager has in his portfolio. Risky/volatile stocks tend to pull the fund's NAV down (hence large drawdowns).
Axis long term equity fund (and the other two funds recommended) scores well on all these criteria. Hence, they are being recommended.
if the listed funds (on Zerodha mf page) are scored well on the above categories, Zerodha should provide other categories funds too like dividend yield, liquid etc. to choose from.
There are close to 1124 funds across 22 AMC available on Zerodha’s MF platform. We are in the process of empanelling more.
We have given a four star rating, this fund witnessed a slowdown in performance in 2016 but eventually recovered in 2017.
The fund’s investment strategy focuses on buying quality growth stocks.
The fund is large-cap oriented as compared to its peers. In the past one year, its large-cap weights have been at 65 to 75 per cent and mid-caps at 25 to 30 per cent, with marginal small-cap positions.
The fund, being a later entrant, managed to skip the bear market of 2008 and thus hasn’t really been tested in a severe market meltdown. Its performance in 2011, however, showed an ability to contain losses in a falling market. It is a good multi-cap option if you like to own quality businesses.
So the conclusion is if any investor wants to play safe in ELSS segment one can go for this fund. because as the large cap portion in this scheme is more so one can opt for a good return.