Reliance Tax Saver Fund-Growth Option

Reliance mutual funds offer a number of options both for risk-averse investors as well as investors with a high tolerance for risks. Reliance mutual funds tend to have a number of characteristics in common - they are diversified, in line with market trends and tend to have slightly better than average performance in their sector.

Tax saving schemes are very popular with investors, so it is not surprising that a reliance tax saver fund is looked for. Tax saving investment schemes are particularly popular for those in the highest tax bracket.

What is a Tax Saver Fund?

Capital gains tax can be a gloomy prospect for investors. If you gain a little and lose most of it to tax, there doesn’t seem to be any point to investing. Luckily, there are a lot of ways the government will lower this tax, and there are many funds which give investment options where the capital gains tax will not hurt your bottom line.

Section 80C of India’s Tax Laws offers the opportunity to invest up to Rs. 1.5 lakh in each financial year, free of tax burden. There are many financial investment products that qualify under this, including (but not only):

• Savings in notified term deposits in scheduled banks but with a holding of a minimum period of five years
• Investments in pension plans
•  Premium payments to Life Insurance schemes
• Any employee’s (but not employer’s) contribution to an Employees Provident Fund (EPF)
• And also, most importantly for those searching for reliance tax saver funds, ELSS or Equity Linked Saving Schemes mutual funds.

What is an Equity Linked Saving Scheme?

ELSSs are a wonderful tax saving investment. They combine several advantages in being very transparent and highly liquid as well as offering tax-free gains. As bonuses, they tend (as a class of schemes) to have low charges and high returns.

The catch is that they are far more risky than other tax saving financial instruments. Certainly, as compared to traditional pension funds or life insurance schemes, an ELSS has a far greater chance of performing below par.

Reliance Tax Saver Mutual Funds

The reliance tax saver is an Equity Linked Saving Scheme. The portfolio mainly consists of investments in equity and equity related instruments and is really suitable for those who want long-term capital growth. Any investment of less than three years will yield disappointing results.

The Reliance Tax Saver (ELSS) Growth has a number of characteristics one must take into account before deciding to Invest in the Reliance Tax Saver:

• The portfolio is balanced between large-cap and mid-cap companies chiefly.
• The portfolio has some diversification, but largely follows market trends with themes like consumption, domestic, and defensive.
• The fund tends to have two or three sector calls at one time, and a small percentage of the portfolio is invested in contrarian calls.
• Investments tend towards companies with the potential of growth prospects over the medium term (three years.)
• There is significant exposure to multinationals and high conviction mid-cap securities.

Reliance Tax Saver Returns

Launched in 2005, as on Aug 31, 2017, reliance tax saver fund had about Rs. 9,042 crore in assets, with 1.98 percent of it the expenses cost, and a yearly dividend of Rs. 12.766. The return since launch value is a decent 16.10 percent with a minimum investment value of Rs. 500.

It falls short in quarterly returns compared with many peers, often showing negative returns over some quarters over the past three years. It’s one year, three year and five-year returns are (as of now) 19 percent, 10 percent and 13.4 percent. This is neither terrible nor remarkably high growth. There are better options than the reliance tax saver with higher past growth, and there are also many riskier options which have caused many investors sleepless nights.

In essence, the reliance tax saver option is for those who want to go the ELSS route with a mutual fund that gives solid but not remarkably risky long-term growth prospects.

Why You Shouldn’t Rely On Past Returns Data

All this said it must be noted that data is only as useful as the person who is analysing it. The state of past returns is no guarantee of future returns. It is not even necessarily a trend. Past returns can demonstrate how well a fund is being managed… or it may simply demonstrate good luck.

The state of the market at a given time can be highly volatile. Over the long term, most decent funds give an acceptable rate of return. Risky funds may, and do, fail and many underperform, but choosing a fund is far more about looking at the diversification and risk profile than it is about the exact rate of previous returns.