Parag Parikh Tax Saver Fund is a New Fund Offering (NFO) by
PPFAS Mutual Fund in the ELSS category.
Features of Parag Parikh Tax Saver Fund
a)It is an open ended Equity Linked Savings Scheme
with a 3 year lock in period from each date of investment.
b)Investors would be eligible for Income Tax
Deduction under section 80C upto 1.50 Lakhs.
c) The fund will be a diversified fund with a
mandatory investment upto 80% into Indian equities.
d) It can participate in buy-backs and other
special situations within India.
Investment Approach of Parag Parikh Tax
Saver Fund
a) A preference for low debt companies.
b) Staying away from momentum investing.
c) Avoid overpaying irrespective of the company.
Fund Managers
of Parag Parikh Tax Saver Fund
Mr
Rajeev Thakkar – CIO & Equity Fund Manager
Mr
Raunak Onkar – Head Research & Co – Fund Manager
Mr
Raj Mehta – Fund Manager Debt
Scheme Details
of Parag Parikh Tax Saver Fund
Opens
on – 4th July 2019
Closes
on – 18th July 2019
Allotment
Date – 24th July 2019
Re-opens
on – 26th July 2019
What does the performance of Parag Parikh Long Term
Equity Fund tell us?
a) A very interesting point to note about this Fund
is that it falls behind in a bull phase but does well in a bear phase.
b) The Fund takes a ‘Focused’ approach even in a
Multi Cap Fund.
c) Its overseas stock pickings are restricted to
developed economies.
d) The Fund is cash heavy as compared to other
multi cap funds.
Since the Tax Saver Fund (ELSS) will be deploying the same
strategy that it has in its Multi Cap Fund, it would be fruitful to read up on
their Multi Cap Fund to get a better understanding of their philosophy.
What are ELSS mutual funds?
a) ELSS which stands for Equity Linked Saving Schemes,are tax
saving instruments under 80c of the Income Tax Act. They have the unique distinction of being the only tax
saving instrument that gives you complete equity returns unlike the rest (ULIP’s
have only partial equity investment along with a higher lock in period).
b) ELSS mutual funds are not restricted with regards to where
to invest (large caps, mid-caps or small caps) but they do need a minimum
investment of up to 80% into equities.
c) Since they do not have any restrictions as such, most of
them can also qualify as having a multi-cap approach. The issue with such an
approach though is that you would need to figure out whether the approach is very
aggressive or moderately aggressive.
For eg. One fund manager may allocate a heavy portion of the
portfolio in large caps whereas the other may take a minimum exposure to large
caps. It does not take a genius to figure out that the former approach would
mean a moderately conservative approach whereas the latter would mean a very
aggressive approach.
d) Most fund managers avoid a value investing approach in an
ELSS mutual fund. This is because unfortunately investors still look at tax
saving mutual funds only for the purpose of saving taxes and not as a means to
a goal. This would also explain why cyclical businesses do not find a place in
most ELSS mutual funds.
Should you invest in Parag Parikh Tax Saver
Fund?
Before deciding on that, you would need to consider two points
a) The performance of the already existing Parag
Parikh Long Term Equity Fund, this is important since according to the Fund
house both the schemes will have the same strategy.
b) Is your purpose with an ELSS mutual fund, only
to save tax or to make returns out of it as well?
Point a will help you decide whether or not you are
comfortable with the investing philosophy of PPFAS since both the schemes will
have the same philosophy. You cannot be pleased or displeased with only one of them,
if you are then serious questions need to be answered.
Point b will help you decide whether your reasons to invest
in a tax saver fund are in line with the philosophy of PPFAS. The fund makes it
clear that it is suitable only for investors with a minimum time horizon of 5
years, the worry with this point though is that very rarely do investors plan
their ELSS funds but rather look at them merely as a tax saving instrument.
If the Fund house has a strategy in place that does not match yours then chances of you staying invested are very slim.
To understand the philosophy of PPFAS, click Here to read our complete review of Parag Parikh Long Term Equity Fund
To understand how to plan tax saving mutual funds (ELSS), click here to read our complete analysis.
To understand how to plan tax saving mutual funds (ELSS), click here to read our complete analysis.
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