Publication details: ET Newspaper
Responses, opinion and view from Kartik Jhaveri.
Question sent by Akash Jindal:-
I want to invest an amount of Rs 70,000 in mutual funds ย (ELSS) for tax saving purpose. Last year I invested in SBI Magnum Tax Saving and Reliance Tax Saver but they both have shown a fall of around 15% to 20 % from their purchase value. Kindly suggest some good mutual funds to invest in.
Advice given:
- Investment in equity mutual funds should be done from a long term point of view.
- Equity mutual fund investments have the potential to generate substantial wealth, provided you stay invested for at least 4-8 years. The reason for this being that a typical business cycle lasts for that much time.
- In simpler words during a period of 4-8 years you will see one or two periods of high prosperity and growth as well as similar periods of gloom and recession.
- For instance, your above mentioned investment of Rs. 70,000 would grow to approximately Rs. 2.8 lakhs or more in 10 years, assuming a growth rate of 14%-15% p.a. In reality ELSS returns have been much larger than that and for very long period of time.
- Also please note, ELSS schemes have a lock-in period of 3 years so although exit is possible after 3 years I suggest that you stay invested for about 4-8 years or more or till such time that you have a definite need to use that money or when you have a better opportunity. I do not think you will ever find a better opportunity than the ELSS. So for now have patience.
