Best Income Tax Saving Mutual Funds

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• Hi Pankaj,

  It happened that I came across your articles on investments. These articles provides a good insight into investments. Thank you for that.

  I wanted to start investing into Equity viz., buying shares directly over online and also investing in MF (buying directly online). As per my knowledge I need to open a DeMat account and Online Trading account for this, which I have to apply yet.

  Here I have a question. For any banking needs, I prefer SBI which is a government bank for various reasons like low fees..for eg: Lower interest rates on loans.

  So, is it good to open a DeMat account and Online trading account with SBI rather than HDFC Bank(i have a salary account with this bank) so that I will be charged low fees like entry and exit loads while I do online trading and buy online MFs.

  Could you kindly answer my query?

  I am willing to take high risk. Could you please suggest me the portfolio (MF + Stock) into which i should invest.

  Thanks,
  Sunil.

  • Hi Sunil,

    Thanks for the appreciation.

    For trading in equities, I would suggest not to go with SBI trading account as their trading platform is not that good, you might face issues while using their site. You may go with any of the account from Kotak Securities, ICICI Direct, IndiaBulls, Sharekhan or Reliance Money, whichever gives you best brokerage deal.

    For investing in mutual fund, I would suggest you not to invest thru trading website as they will levy entry load. Rather do it directly with AMC. It will be a bit complex but will save 2.25% of your money. Read these article for more details: http://www.pankajbatra.com/2008/09/05/mutual-fund-investment-with-zero-entry-load/ and http://www.pankajbatra.com/2008/09/05/best-way-to-apply-in-sip/. Apply first time thru hard copy forms along with application for PIN; after that you may do it online from Mutual fund websites.

    Regarding your portfolio, I would suggest you to divide your investment into multiple plans.
    First of all, I would suggest you to buy a Term insurance plan for sure. This will give you coverage of 50,00000 for around 12000 Rs a year. Its like a car insurance, nothing will be returned in case you complete policy period but if something happens before that your family will get huge insurance amount (50 Lacs in this case). This comes under tax saving investment. For rest of the tax saving, buy ELSS (equity linked mutual funds) and a medical insurance. Don't go for ULIPs.

    Secondly, Keep at least 6 months of your salary as a backup as liquid for bad times. You may keep this amount in Liquid Mutual Funds. Read here for more about them. http://www.pankajbatra.com/2008/09/23/liquid-mutual-fund-saving-account/

    Now whatever is left with you after all monthly expenses (personal, saving to liquid funds, TDS, EPF etc), you should divide into different funds or equities. You must go with diversified mutual funds or Top 100 companies for equities.

    Hope this helps.

    Best
    Pankaj Batra

• Hi Pankaj,

  Too Good.
  Your reply was so detailed and will really help me in proceding further with my investment plan.

  Thanks a lot Pankaj. Will keep in touch.

  All the Best.

  Regards,
  Sunil

• Hi Pankaj
  Your site is really good.
  I need some help on TOP ELSS & non Tax savings scheme too.

  & also let me know buying MF's through Reliance money or HDFCMF online have entry load.
  can we buy other MF's from HDFCMF

  Regards
  Aryan

• Thanks for all the latest informations .
  Keep up the good work .
  With best wishes :
  Alokmoy

• Nice article

• Hi Pankaj,
  You are very informative and apt.
  I invested some amount in Reliance Natural Resources Fund, NFO. I now feel that it was not a wise selection to invest and wish to exit. What would you suggest? Which ELSS fund should I opt for, now?

  • @Suresh
    Reliance Natural Resources Fund has recovered very well in past one month and currently at the same level as of NFO price.
    As metal is performing well, this fund is also doing well. This will rise further as soon as fight between Ambanis end over oil prices.
    For ELSS, Sundaram BNP Paribas Taxsaver, SBI Magnum Tax Gain Scheme and Franklin India Taxshield are good.

• Hi Pankaj,

  I have lost some money by investing in Franklin prima plus. Please suggest me some funds in order to save the tax and also for good returns.
  Regards,
  Murthy.

  • @Murthy
    You can invest in Franklin India Taxshield, Sundaram BNP Paribas Taxsaver or SBI Magnum Tax Gain Scheme

• Hi Pankaj,

  I have just stepped into the world of stockmarkets, and a friend has persuaded me to start my trading account with Angel trading (angelbroking.com). In your valued opinion, how wise is it to go ahead with them?
  Also, for a medium capacity investor, it seems SBI Magnum is a good option for good returns. Correct me if I am wrong .... thanks so much!

  • @Piyush
    Broker can not provide good return. Its the investment that gives you return, It does not matter who the broker is, If you invest in right place, you will get good return.

• Incase of Tax Saver MFs whether I should opt for With divdend or without dividend scheme. If Iopt for dividend payout, the same,I can reinvest in Ta x saver fund and thus can have a addl.tax saving or vice versa
  Regars
  S C Arora

  • @S C Arora
    If you going with ELSS just for tax saving and want money back as soon as purpose is solved, then dividend is better option.
    But if you want good return on investment, growth schemes are good.
    When dividend is declared value of your funds also gets adjusted accordingly and your get some money back from your account.

• I want to invest in mutual fund through SIP. I am prepared to take high risk . On the basis of previous track record i have listed some equity diversified funds and ELSS for investment as follows
  1. HDFC Equity fund
  2. HDFC Top 200
  3. BSL mid cap fund.
  4. BSL frontline equity
  5. Reliance growth
  6. HDFC Prudence .
  7.HDFC tax saver
  8. Sundaram Tax saver
  9. SBI magnum taxgain.

  I am planning to invest in these funds for log term(8 to 10 years). what is your opinion.is it ok or i should look out for some other mutual funds.

  • @Thakur
    All of these funds are good and performed well in past. I think you must go with them and invest for future.