Spread your ELSS investment

I want to make a lump sum investment of around Rs 30,000 in an ELSS (Equity Linked Savings Scheme) fund. Please help me choose a good one.

-Brijesh Kumar Dembla

We advise you to spread your investment of Rs 30,000 over four or more instalments via an SIP (systematic investment plan), instead of parking your money in one go. You may get the benefit of rupee cost averaging. You may choose between Canara Robeco Equity Tax Saver and Fidelity Tax Advantage.

Dividends will be taxable or tax-free on the following funds: Reliance MIP (dividend monthly) and HDFC MIP (Dividend monthly).

- Sushil Yadav

For income tax purposes, MIPs are treated as debt funds, which carry a dividend tax of 14.16 percent. But it is tax-free at the hands of investors.

Is it a good time to invest in ICICI Prudential Income Opportunities Retail (Growth)?

-Sundareswaran Krishnamoorthy

ICICI Prudential Income Opportunities is a debt fund that invests in securities which have a maturity profile of over 3 years. The fund has just completed a year and done exceedingly well.Its strategy of investing in longer-dated paper could backfire if interest rates start to move up, which is very likely in the near future. Being a new fund, it hasn't quite got the opportunity to display its prowess in a rising interest rate scenario. Hence, it would be prudent at this point of time to invest in some other established fund that has a shorter average portfolio maturity.

I have been investing in ICICI Prudential Services Industries, Magnum Global and DSPBR T.I.G.E.R. for the past three years. Despite a rising stock market, these funds have not shown any recovery. Should I move out of these funds? If yes, can you suggest some options?

-Mahesh Satoskar

DSPBR T.I.G.E.R and ICICI Prudential Services Industries are thematic funds. Magnum Global has the mandate to invest 80 per cent of the portfolio in companies via equity, partly convertible debentures and fully convertible ones. The balance may be allocated to money market instruments.

Magnum Global is a three-star rated fund and the year-to-date and 1-year return (as on November 12) puts it ahead of the diversified equity category average. DSPBR T.I.G.E.R (four-star) and ICICI Prudential Services Industries (two-star) have both underperformed the broad category average on both these return parameters. We are clueless as to your entire portfolio, but you can stay invested in DSPBR T.I.G.E.R and exit the others. You can also look at HDFC Top 200 and Birla Sun Life Frontline Equity.
 

Returns (Nov 25, 2009)
Funds	Rating	Ytd (%)	3-year (%)
DSPBR  T.I.G.E.R	4 star	72.82	10.45
ICICI Prudential Services  Ind	2 star	71.44	3
Magnum Global	3 star	103.42	2.37
Equity Diversified Category (average)	-	78.56	8.69

I want to invest in gold. I have thought about Gold ETFs (Exchange Traded Funds). What will be the tax implication if I stay invested for more than a year?

-Mehul Porecha

From the tax point of view, Gold ETFs are considered as debt funds. Since debt funds attract both dividend distribution tax (12.5 per cent), short-term (as per income slab) and long-term capital gains tax (10 per cent with indexation and 20 per cent without).

Value Research