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Gain By Staying Invested

Tax saving funds are meant for the long-term to optimise returns

I wanted to invest in Sundaram Tax Saver Fund. Is it good? I have already invested in Tata Tax Advantage three years earlier. Should I redeem?

Whenever one is investing in a tax saving fund, look at an investment term of three years and beyond. In any case, one cannot bring out money before three years are up because of the lock-in period. If you do not bring out money from tax savings for 10-15 years, it can add up to a fairly large amount. If there is no immediate need, one should not bring out the amount.

It is not a function of when to take out. Markets are cyclical as they would go down sometime and come up and over a period of time, they tend towards higher levels. We have seen markets moving from 2,800 to 4,000, coming down to 3,500 to 6,000. If you are young and have 10-15 years, then if you are investing rupees one lakh in equity funds, the result of forgetting it for the next 15 years while you are taking the tax breaks, can translate into a substantial amount. By the way, Sundaram Tax Saving is a good fund.

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