I am primarily looking for ELSS funds for exemptions under Section 80C tax. I already have investments in HDFC Long Term Advantage Fund, Franklin India Opportunities and Fidelity Tax Advantage Fund. What do you think of my portfolio? Which other funds must I consider for better market coverage and returns.
-Prashant
First and foremost, Franklin India Opportunities (3-Star) is not a tax planning or ELSS fund so an investment made here is not eligible for tax rebate.
However, the tax planning segment of your portfolio is well balanced between a large-cap and mid-cap oriented fund. If you want to increase your exposure to tax funds, you can direct future investments to the two existing ELSS funds, in equal proportion. Most investors have a tendency to look at new funds to direct fresh investments, and this often leads to a cluttered portfolio. When the existing funds in your portfolio are performing well, you should ideally stick to those funds. Since ELSS funds carry a three-year lock in investment in these funds cannot be redeemed before three years from the time of subscription.
As regards your portfolio, the most glaring aspect is the absence of a core holding. The tax funds will be illiquid for the lock-in time frame and hence cannot form the core of your portfolio. Franklin India Opportunities is the only other diversified equity fund owned by you. Given the nature of this fund, it can be classified best as an aggressive equity fund. Being an opportunistic fund, it changes its complexion quite rapidly. The fund will not adhere to any market cap and sector. In order to better align your portfolio, we suggest an investment in a specifically large-cap oriented, 5-star rated fund. You can select such a fund from the Scorecard printed in this magazine. Such an inclusion will temper the aggressive stance of your portfolio.
This article was originally published on August 29, 2007.
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