Exiting ELSS Funds

Exit underperforming tax-saving funds after the mandatory three-year lock-in period is overů


I am investing Rs 2,500 in BSL Tax Relief 96 and Principal Personal Tax Saver. Both the funds are performing badly. I have also selected HDFC Top 200, DSPBR Top 100 Equity, BSL Frontline Equity, IDFC Premier Equity and Reliance Regular Saving Equity. Is it the right approach?
- Breen

Schemes  Category  Rating  3-yrs ret (%)  5-yrs ret (%)
BSL Frontline Equity Large & Mid Cap **** 9.5 17.72
BSL Tax Relief 96 Tax Planning *** 1.66 10.1
DSPBR Top 100 Equity Large Cap ***** 8.99 16.97
HDFC Top 200 Large & Mid Cap ***** 13.4 18.13
IDFC Premier Equity Mid & Small Cap ***** 13.96 22.22
Principal Personal Tax Saver Tax Planning *** -0.3 9.25
Reliance Regular Savings Equity Multi Cap **** 8.51 19.6
Returns as on May 24, 2011 Ratings as on April 30, 2011

Your observation about both the tax planning funds is correct. They are not performing well and you should cut your losses and exit them if the mandatory three-year lock-in in these two funds is over. The other five funds that you have selected provide you diversity in style and number and are good. Collectively, these five funds provide a core and satellite approach to your portfolio which offers stability as well as scope for higher returns. All you need to do is to invest regularly in these funds, track the performance of these funds at least once a year to check its progress and carry any changes to fund holdings if a fund starts to underperform regularly.



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