Out of the several mutual fund categories, ELSS is one that stands out for various reasons. For starters it has much higher exposure to the equity market than quite a few of the other categories. Higher exposure to equity translates to higher returns when compared to other funds that have relatively lower investments in equity. It also does bring in an element of risk, which we will discuss a bit later on. DSP Blackrock Tax Saver falls into the category of ELSS, which means it has a lock-in period of 3 years an offers tax benefits under Section 80C. The lock-in period is a bit on the higher side if one considers other mutual funds. The 3 year lock-in period prevents the investor from redeeming or switching units within that time frame. Also there are no exit loads which one needs to pay at the time of redemption. If an investor is looking for a fund that allows them to withdraw their money or redeem units instantly, DSP Blackrock Tax Saver might not be the best bet.
DSP Blackrock Tax Saver fund is an open ended equity linked saving scheme (ELSS) mutual fund. DSP Blackrock, which is one of the largest asset management companies in India, manages this tax saver mutual fund. The fund fits perfectly in the portfolio of individuals seeking higher returns from their investments, while getting tax benefits as well. DSP Blackrock Tax Saver has constantly outperformed the benchmark, which gives investors the much needed confidence that they usually seek from their mutual funds.
Objective of Investing in DSP Blackrock Tax Saver Fund
One of the reasons behind the immense popularity of mutual funds as a whole is the ability to grow ones money at a faster pace. The DSP Blackrock Tax Saver Fund has almost 96% of its assets allocated to the equity market. Yes, that does seem to open up the possibility of market fluctuations but the 3 year lock-in period prevents investors from making panicky withdrawals. In the medium to long term, the DSP Blackrock Tax Saver Fund has outperformed its indices by a substantial margin. While past performance of a fund doesn’t necessarily assure good future returns, it is a good starting point to see how the fund might be expected to perform in the future.
Investment Style of DSP Blackrock Tax Saver Fund
If each of the mutual funds had similar style of investing, they would most probably end up with a similar looking portfolio. DSP Blackrock Tax Saver has a relatively different investment style when it comes to its peers. A quick look at the portfolio and holdings of the fund and the investor will walk away with the idea that the fund invests a large chunk of money in the finance and banking domain. But the fund has a pretty flexible approach when it comes to investing in various sectors and stocks. This allows the fund manager to explore various options and choose a sector or stock where he sees a good investment opportunity. This approach works well for this ELSS, as the substantially higher returns over its benchmark in the long term are evidence of the same.
Risk Level of DSP Blackrock Tax Saver Fund
One has to be very naïve to believe that a fund with almost 96% of investments in equity has no risk at all. If one wants to invest in DSPBR Tax Saver, they need to be aware of the fact that the fund has a moderately high risk including risk to the principal invested associated with it. But the lock-in period of 3 years can help investors tide over most of the short term fluctuations in the capital market. If one gives the fund a decent enough amount of time by staying invested in the medium- to long-term, the returns can be potentially quite high. DSP Blackrock Tax Saver also has an unconstrained approach with respect to sectors and market cap when it comes to choosing investments. Though it provides its fund manager with much needed flexibility, it also brings in additional risk.
Tax Benefits with DSP Blackrock Tax Saver
Investments in an ELSS give investor provision to save up to Rs. 1.5 lakh annually under Section 80C of the Income Tax Act, 1961. When one invests in the DSPBR Tax Saver fund, the investor can benefit from the same. As the fund primarily invests in equity market, capital gains taxation mechanism is applicable to the investment. This is where the 3 year lock-in period comes in as a boon. Any proceeds that an investor receives from the fund are tax free as the fund is held for a minimum of 3 years, exempting it from short term capital gains tax. Additionally any dividends that an investor may receive from the fund at any time are also completely exempt from tax.
Features of DSP Blackrock Tax Saver
Inception: The DSPBR Tax Saver fund was launched on 18th January 2007.
Entry Load: Securities Exchange Board of India (SEBI) has set rules and regulations under which mutual funds cannot charge their customers with entry load.
Exit Load: As is the case with any ELSS fund, there are no exit loads as the lock-in period is of 3 years.
Minimum Investment Amount: The investor needs to invest at least Rs. 500 to add DSPBR Tax Saver Fund to their portfolio. Additional investments can be in the multiples of Rs. 500. The same amount also holds good for a SIP (Systematic Investment Plan) for a minimum of 6 months.
About Fund Manager: Anup Maheshwari headed the fund from January 2007 till June 2012 and was followed by Apoorva Shah who headed the same from July 2012 to June 2015. Currently Mr. Rohit Singhania manages the fund. Mr. Singhania joined the fund house as an analyst of the PMS division in 2005 and later moved on to the equity division in 2009.
DSP Blackrock Tax Saver Fund - Plans and Options
An investor can choose to invest in DSP Blackrock Tax Saver with Growth, Dividend or Direct plan. In Growth the gains are reinvested in the fund, which allows the NAV to increase. If an investor chooses the dividend option, the gains are passed on to the investors, though there is no pre-defined time or amount for the same. Direct plan allows investors to skip out on the commission and allows the investor to enjoy a lower expense ratio, but this comes with relatively higher NAV as compared to the regular plan.
DSP Blackrock Tax Saver Fund Holdings
The top 10 holdings of DSP Blackrock Tax Saver fund along with their weightages are as follows*:
|Holdings||Weightage in %|
|HDFC Bank Limited||5.69|
|ICICI Bank Limited||4.34|
|CBLO/Reverse Repo Investments||4.29|
|Yes Bank Limited||4.14|
|Tata Steel Limited||3.84|
|Housing Development Finance Corporation Limited||3.38|
|State Bank of India||3.17|
|Hindustan Petroleum Corporation Limited||2.83|
|Sector||Weightage in %|
|Finance – NBFC||5.22|
|Finance – Housing Division||4.37|
*The above allocations are subject to periodic change.
Who Should Invest?
If one is on the lookout for an instrument that allows tax savings without compromising on returns, DSP Blackrock Tax Saver fund can be a pretty good option. The fund is managed by an effective team with lots of experience under their belt. The fund has various strategic investments in the banking and finance domain, a sector which has been performing well over the years. The fund performed pretty well in the past few years and has shown that if things go in its favor, it can help investors achieve their savings targets much faster.