Parag Parikh Tax Saver Fund NFO review


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.

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Disclaimer : While due precaution has been undertaken in the preparation of this article, The Mutual Fund Guide or any of its authors will not be held liable for any investments based on the above article. The above article should not be considered financial advice and has been published only for your perusal. Due credit has been given in case wherever required, in case you feel any part violates any rights then do get in touch with us and we shall get it duly removed.  
Mutual Fund investments are subject to market risks. Please read the offer document carefully before investing

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