Is icici prudential tax plan a good investing option at this moment of time?

Question

I am planing to invest 2k per month and inaddtion save some tax too.. Is icici tax plan a better option compared to other schemes available?..It has tax growth plan (NAV 93.49) and tax divident plan(NAV ~ 11)... What is the basic diffrence b/w two?... for the last one year its doin bad --RETURNS only 2.59.

so should i take the plan?.. as the market is down NAV will b very low at this time and hence i can purchase more units.. so is it the right time to buy this mf?...... if i ever plan to take it up which one should i go for?.. dividend or growth?....

Thanks in advance pals

Answer 1

Most of the equity funds have come down now as a result of the stock market melt down in the recent months.

So this is the right oppurtunituy to enter into such funds.

Answer 2

ICICI tax plan has not done well in last 1-2 year. Avoid it as we have othe good options like SBI Manum tax & Sundram Tax saver.

Take growth option if you do not need money partially in 3 years. Dividend option will give you part of your return when ever company declare it.

Market are currently down & cant say if this will go up or down. Just invest via SIP monthly to average your investments.

Answer 3

This is certainly a good time to start getting in -but into the best of the funds. And don't put all your money in one go . If you are a first-time investor then go for monthly SIPs.Over the year your costs will average out.  Otherwise allocate 20% of funds at a time- market can certainly slide lower -who can tell- and you shouldn't be wringing your hands, having allocated all your money upfront. Its much better to be patient and satisfied with above-average to high returns than trying to maximise all the juice at one go!

Now, ICICI Prudential Taxgain is a high risk/high return Fund.  Its track record is certainly good over a longer time horizon like 5 years but has fared poorly in the last year -so have the whole category of Tax saver or ELSS funds, but it has fared much worse than the category average over 1 year and 3 year periods. Only the 5 yr track record is better than the category average. check out the record at http://www.valueresearchonline.com/funds...

There is a reason for its volatility -the High risk-high return strategy. In a nutshell, this is not among the best ELSS funds; this fund has the calibre to reward you well but it will definitely test your nerves. Therefore, invest in it only if the ups and downs of the stock markets do not bother you much. Read complete analysis of the fund at http://www.valueresearchonline.com/funds...

Now if I were you, I would try to identify the best ELSS fund. I can easily do that by checking the Top funds at http://www.valueresearchonline.com/topra...

Currently SBI Magnum Taxgain and Sundaram BNP Paribas Taxsaver are rated as 5-star ELSS funds. So I would like to investigate the fund more, check out its track record and compare with above from http://www.valueresearchonline.com/funds...

and http://www.valueresearchonline.com/funds...

and http://www.valueresearchonline.com/funds...

Now for choice between Dividend plan and Growth plans.

Most mutual fund schemes come in three options - dividend, dividend reinvestment and growth. The fact that under the dividend option the fund keeps on declaring regular dividends and no such payments accrue under the growth option might suggest to some investors that the former are more yielding. However, the truth is that it does not make a dime of difference which option you choose, from the pure investment-yield point of view. The form in which you choose to receive the gains might have tax implications though.

When your fund pays out a dividend all it has done is - paid out the gains it has generated instead of accumulating it. So now the onus of investing this money falls back on you. Moreover, any dividend paid means that the fund pool is smaller by the amount of the payout and this is reflected in the lower NAV. Had the fund not paid the dividend, it would have been reflected in the higher NAV of the fund and as a result the value of the units held by you would have appreciated which you would have realised on redemption. Under the dividend reinvestment option, the same dividend amount as paid under the dividend option is paid. However, instead of an absolute amount, the dividend is paid in the form of higher units issued to the investor.

There is a caveat, though. Investors should opt for that option that minimises their tax liability. If dividend income is tax-free (as is the case with dividends from equity funds), then the dividend option or the dividend reinvestment option is a good bet. If capital gains are tax-free (as is the case currently with equity-oriented funds) then choosing the growth option would probably be more viable. If both are tax-exempt, the net returns will be identical from any option.

Hope this comprehensively answers your query and similar questions others may have had about such choices to make while investing inf Mutual Funds!

Good Luck!