Recently, I had posted an article about the best tax saver mutual fund to invest in 2016. After stringent criteria of risk and portfolio, I have selected 3 best ELSS to invest in 2016. But, that list of top 3 best ELSS did not consider the SIP return. Whereas, most of the investor choose SIP route to invest in tax saver mutual fund.
In an SIP, investment is staggered throughout the period, while Lump sum investment put the big amount of investment at one go. This does not involve the pain of timing. You can invest stress-free.
The regular investment through the SIP averages out the purchase price of the whole investment. The average purchase price of a mutual fund units through the SIP would neither at high price nor at the low price.
But because of this ‘averaging’ and ‘staggered’ investment, the return of an SIP is very different to the lump sum investment.
The SIP moderates the effect of market volatility. Neither, It will lead you to the peaks nor you will touch the rock bottom. Because of this moderation, the financial planners always recommend investment through the SIP method.
Because of the difference in return of lump sum investment and SIP, It would be prudent to judge a tax saver mutual fund scheme on the basis of SIP performance. For an SIP investor, the SIP performance would be more relevant than the return of 1 year, 3 years or 5 years.
The Selection Methodology of Best Tax Saver SIP
In the previous post on best tax saving mutual fund, I have set parameters to judge an ELSS. Those parameters are also relevant for the SIP investment except the ‘returns‘.
So, I am going to assess the tax saving mutual funds on the basis of following criteria.
The Fund Management Company
In the previous post, I deliberately did not use this criteria. I wanted to check the performance of different fund houses. Incidentally, The top performer were the reputed fund house.
Now, to shortlist best tax saver SIP, I would pick the ELSS fund only from the bigger, older and professional fund houses. My chosen fund management companies are given below.
- Axis Mutual Fund
- Birla Sun Life
- DSP Blackrock
- Franklin Templeton
- SBI mutual fund
- HDFC mutual fund
- ICICI Pru AMC
The investment through the SIP reduces the risk. It is good for our money. we should also prefer those ELSS which takes less risk than its peers. My next parameter is the ‘RISK’ of tax saver SIP. I am selecting only those fund which take average or below average risk in their investment strategy.
To mitigate the risk further, we should look into the portfolio of the tax saving mutual fund. The fund should not concentrate into the midcap or small cap stocks. These stocks are very volatile and can give you sleepless nights. Therefore, best ELSS should be the one which invests primarily in big and established companies.
Also Read: 7 Qualities of Good ELSS Fund
This parameter is the most important for best tax saving mutual fund for SIP. I am taking SIP returns to get the best tax saving mutual fund. It would give a clear picture for your future investment.
To evaluate the SIPs I have chosen last 3 year period. Since, Direct plans of mutual fund has been started 3 years back, I am taking account of only direct plans. I know the data of ‘Direct plans’ would be more relevant to you.
A fund can show great return because of an outstanding phase, but only the SIP return shows the consistent performance of a mutual fund scheme.
I have taken the first day of the month as the SIP Date. I assume that monthly SIP of Rs 1000 started from 1 January 2013. Till 1 December 2015, I have paid 36 installments of 36,000. Let us see how much each ELSS scheme would have given me.
After executing the previous criteria, I have following ELSS funds to evaluate.
|Fund Name||Annual Return (%)||SIP Mode||Rank||One Time Mode||Rank|
|Axis Long Term Equity Fund – Direct Plan – Growth Option||29.08||54,565||1||76,087||1|
|Birla Sun Life Tax Plan – Retail Growth – Direct Plan||25.26||51,829||2||65,186||2|
|DSP BlackRock Tax Saver Fund – Direct Plan – Growth||21.59||49,290||6||61,153||6|
|Franklin India Taxshield – Direct – Growth||23||50,253||3||63,507||5|
|HDFC Long Term Advantage Fund -Direct Plan – Growth Option||15.18||45,049||9||56,797||7|
|BNP Paribas Long Term Equity Fund – Direct Plan – Growth Option||22.79||50,110||4||63,613||4|
|IDFC Tax Advantage (ELSS) Fund – Direct Plan – Growth||22.28||49,762||5||63,850||3|
|SBI Magnum Taxgain Scheme 1993 – Direct Plan -Growth||19.44||47,839||7||59,690||8|
|UTI Long Term Equity Fund – Growth Option – Direct||17.01||46,236||8||56,399||9|
To understand the difference, I have given the maturity value of lump sum investment as well. I have also given the rank achieved through both the mode. Incidentally, top two ELSS are same. The Axis long Term Equity and Birla Sun Life Tax Plan performed best in the lump sum as well as in the SIP method of investment.
But there is a change in the third rank. Through the lump sum method, it would be IDFC tax advantage on the third rank. While in SIP method the Franklin India Taxshield gets the third position. You can see the changed ranks of other ELSS as well.
So The minimize the confusion let me put the top 3 best tax saving mutual fund if invested through the SIP mode.
|Best Tax Saver SIP||Annual Return (%)|
|Axis Long Term Equity Fund – Direct Plan – Growth Option||29.08|
|Birla Sun Life Tax Plan – Retail Growth – Direct Plan||25.26|
|Franklin India Taxshield – Direct – Growth||23|
Axis Long Term Equity Fund
I have written enough about the Axis long term equity fund. This, relatively fresh fund has been black horse among the ELSS. It has been on the top since last 3 years. Axis Long Term Equity Fund is far ahead to its nearest competitor. It has achieved highest return despite taking a very low risk. Kudos! Axis Long Term Equity Fund.
Birla Sun Life Tax Plan
The last 5 years of the Birla Sun Life Tax Plan has been spectacular. It has beaten the benchmark and category both. The fund manager Ajay Garg has managed this fund very well. After the Axis Long Term Fund, you can rely on Birla Sun Life Tax Plan for a good return.
Franklin India Taxshield
This Fund has been developed a fair process to avoid the big risk. It does not venture into small and midcaps. Rather it scouts for the value pick among the large cap stocks. Sometimes. It also takes the contrarian view. The Fund manager Anand Radhakrishnan is an old hand and he has performed quite will since last 8.5 years. Know more about the Franklin India Taxshield.
In this post I have presented best tax saver SIP to invest. I have ranked the ELSS on the basis of SIP return because most of the people invest in ELSS through the SIP mode. However, if tax saving is not an issue, you can check out the best SIP Investment Plans for 2016 and 2017.
(Data Updated on 29/12/2015)