Tuesday 26 February 2008

Reliance Equity Linked Savings Fund–Series I (Tax Saving)–Review

Reliance mutual fund has come out with its Reliance Equity Linked Savings Fund – Series I. It offers tax benefits and that is the reason that the time of launch of the NFO was scheduled for the financial year end.
In this article, I’ll attempt to provide a review of Reliance Equity Linked Savings Fund – Series I. It should help you in taking a decision about whether one should invest in Reliance Equity Linked Savings Fund – Series I.

Typically, this is also a kind of ELSS or Equity Linked Savings Scheme that offers tax benefits and due to this, the lock-in period is there of 3 years. Hence, you cannot take out your invested money before 3 years.

The working principle of this scheme is same as that of any other mutual fund. You money is invested into shares and debt instruments with a given level of exposure and the fund manager will attempt to pick the best performing stocks so as to generate capital appreciation in the long run. The Reliance Equity Linked Savings Fund is having an investment horizon of 10 long years.

Asset Allocation in Reliance Equity Linked Savings Fund

Equities will be having a corpus of 80% to 100% while debt and money market instruments will make up for the remaining 20% to 0%. Hence, primary exposure is for equity, and the fund manager may invest even in overseas instruments like ADR/GDRs. Ultimately, you are giving away the decision making power to the fund manager for him to play around with your money.

You have 2 Options Available for returns and investments under Reliance Equity Linked Savings Fund:
• Growth Plan - Growth option

• Dividend Plan - Dividend payout Option


The Reliance Equity Linked Savings Fund will be tracking the Benchmark Index: BSE 100.

Minimum Investment Amount:

Reliance is easy on the investment amount – just Rs. 500 and in multiples of Rs.500/- thereafter. However, as per section 80 C of the Income Tax Act, 1961, the tax benefit will be available only upto a maximum amount of Rs.1,00,000/-.


SIP: Systematic Investment Plan is Not Available for Reliance Equity Linked Savings Fund
Charges

Recurring Expenses of Reliance Equity Linked Savings Fund

Type

Upto (%)

Investment Management Fees

1.25%

Marketing Expenses

1.00%

Operational Expenses

0.25%

Total

2.50%



Ultimately, whether or not your investment in Reliance Equity Linked Savings Fund produces any profit, your money will be deducted necessarily to the extent of 2.5%. However, you do get tax benefit, but it comes at a cost of 3 year lock-in period.

It is claimed that during the NFO, there is NO ENTRY load for Reliance Equity Linked Savings Fund. The exit load is also quoted as NIL after 3 years, but with an asterisk (*). There are some calculations about amortization & redemption between 4th and 10th year, which ultimately mean that your exit load is NOT NIL. You will DEFINITELY have to pay some exit load if you decide to take out your invested money any time between 4th and 10th year in Reliance Equity Linked Savings Fund.
So, tax saving hungry investors can look for investing in this Reliance Equity Linked Savings Fund. Three year lock-in period and tracking the benchmark of BSE 100 which includes lots of midcaps may help you in making good returns, along with tax benefit. Table of Contents

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