The charm of this fund lies in its ability to generate trail-blazing returns. But it won't go down well with investors who prefer stability over high returns. The fund's high-risk high-return strategy is evident in its performance record. During the first quarter of 2007, when equity markets were in a spot of bother, this one lost massively (-10.92 per cent), far high than the category's loss of 6.45 per cent.
Indian stock markets have witnessed increased volatility over the last one year, and ICICI Pru Tax Plan has found the going quite tough, as it has been ranked 25th in the category of 26. But increase your time horizon to three years, and the fund is placed among the top performers- with annualised returns of over 53 per cent, it sits pretty at third rank.
What adds to the risk of this fund is the kind of portfolio it holds. It invests aggressively in the stocks of small-sized companies. The combined allocation to mid- and small caps has averaged 87 per cent of the assets in the last one year. But of late, the fund has increased its allocation to large caps to over 22 per cent (from under 10 per cent earlier) to tone down its aggression a bit.
The fund is not only aggressive in selecting stocks but also tends to churn its portfolio quite frequently. The fund manager loves to try out stocks but the buy-and-hold strategy does not seem to be his priority. But it spreads its portfolio across over 50 stocks to partially mitigate the risks that come with investing in scrips of smaller companies.
In a nutshell, this fund has the calibre to reward you well but it will definitely test your nerves. Therefore, invest in it only if the ups and downs of the stock markets do not bother you much.