Dsp Blackrock Tax Saver Fund: Worth Investing?

The DSP ELSS Tax Saver Fund is a mutual fund that seeks to generate medium to long-term capital appreciation from a diversified portfolio of equity and equity-related securities. The fund has consistently higher annualised returns than the category average for the past 1, 3, 5, and 10 years. With a lower expense ratio of 0.74% and higher alpha, the fund has generated returns higher than the benchmark index. The fund has a very high risk rating and investors should be prepared for the possibility of moderate losses. It is suitable for investors looking to invest for at least 3 years, who are also seeking income tax benefits.

The benefits of investing in the DSP ELSS Tax Saver Fund

• Investors can expect gains that beat the inflation rate and returns from fixed-income options.
• Investments of up to Rs. 1.5 lakh in a financial year are tax-exempt under Section 80C of Indian income tax laws.
• The fund has consistently higher annualised returns than the category average for the past 1, 3, 5, and 10 years.
• The fund has a lower expense ratio of 0.74% compared to its peers.
• The fund has a higher alpha of 3.55, indicating it has generated returns higher than the benchmark in the last 3 years.
• The fund has a large amount of assets under management (AUM) of ₹1,67,044 Cr, demonstrating its popularity and success.
• The fund has a diversified portfolio, with 96.72% investment in domestic equities across Large Cap, Mid Cap, and Small Cap stocks.
• The fund is suitable for investors looking for medium to long-term capital appreciation and income tax saving benefits.

The risks of investing in the DSP ELSS Tax Saver Fund

The DSP ELSS Tax Saver Fund is considered a very high-risk investment. The fund carries a moderately high to high level of market risk compared to debt funds and balanced funds. The fund value fluctuates alongside the underlying stock price changes. These price changes may be influenced by interest rates, exchange rates, government policies, tax laws, and other economic developments.

The DSP ELSS Tax Saver Fund has a lock-in period of three years, which is the shortest among tax-saving options under Section 80C. This means that investors cannot redeem their investments before the completion of the three-year period from the investment date. During this time, investors may experience short-term return fluctuations, especially during periods of market volatility.

Additionally, the DSP ELSS Tax Saver Fund does not guarantee assured returns, and the fund performance may vary from one period to another. While historically, ELSS funds have delivered average returns of around 12%-15% over a period of more than five years, there is no assurance of achieving similar results in the future.

It is important for investors to carefully consider their own risk tolerance and investment goals before investing in the DSP ELSS Tax Saver Fund. While the fund offers potential for long-term wealth creation and tax benefits, it also carries significant risks that should be carefully evaluated.

How does the DSP ELSS Tax Saver Fund compare to other funds?

The DSP ELSS Tax Saver Fund has consistently outperformed its category average in terms of annualised returns over the past 1, 3, 5, and 10 years. It has also generated higher returns than its benchmark, the NIFTY 500 Total Return Index, over the last 3 years. The fund's expense ratio of 0.74% is lower than what most other ELSS funds charge, which means investors keep more of their returns.

The fund's ability to deliver returns consistently is in line with most funds in its category, and its ability to control losses in a falling market is above average.

Compared to other funds in its category, the DSP ELSS Tax Saver Fund has a lower Sharpe ratio, indicating that it has generated poorer risk-adjusted returns. It also has a lower beta, suggesting that it is less sensitive to market changes and is therefore less volatile.

Overall, the DSP ELSS Tax Saver Fund appears to be a strong performer relative to other funds in its category, offering higher returns and lower fees. However, its risk-adjusted returns are somewhat lacking, and investors should consider their risk tolerance when deciding whether to invest in this fund.

What are the fees associated with the DSP ELSS Tax Saver Fund?

The fees associated with the DSP ELSS Tax Saver Fund depend on the type of plan chosen by the investor. There are two types of plans: Regular and Direct. Both plans are the same except for the commission paid to the mutual fund broker/distributor. Investors do not need to pay any additional fees to purchase any of these options. However, the plans have different expense ratios. Regular funds have a higher expense ratio, while direct funds have a lower expense ratio. The difference in expense ratios is due to the commission paid to the broker/distributor. A lower expense ratio leads to higher returns for investors.

The expense ratio for the DSP ELSS Tax Saver Direct Plan Growth is 0.74%. The expense ratio for the DSP ELSS Tax Saver Fund - Regular Plan - Growth is 1.63%. This is the annual fee that the fund charges for managing an investor's money. It is deducted from the Net Asset Value (NAV) on a daily basis. For example, if an investor has invested 10,000 rupees and the expense ratio is 2%, they would have paid 200 rupees in fees to invest in mutual funds.

In addition to the expense ratio, there may be other fees associated with the DSP ELSS Tax Saver Fund, such as taxes and exit loads. Long-Term Capital Gains (LTCG) tax is applicable to ELSS funds as they have a lock-in period of 3 years. Gains are taxed at 10% for gains over 1 lakh rupees. If an investor redeems their investment within one year, returns are taxed at 20%. If they redeem after one year, returns exceeding 1.25 lakh rupees in a financial year are taxed at 12.5%.

How do I invest in the DSP ELSS Tax Saver Fund?

Investing in the DSP ELSS Tax Saver Fund can be done in a few simple steps. Firstly, you can invest by clicking on the "Invest" button on the DSP Mutual Fund website. If you are a new investor, you will need to create a portfolio by providing the necessary details, and if you are new to mutual funds, you will also need to complete the KYC requirements. Follow the on-screen instructions to proceed. Alternatively, you can invest through a mutual fund distributor.

The DSP ELSS Tax Saver Fund offers both growth and IDCW (Income Distribution Cum Capital Withdrawal) options, allowing investors to choose based on their needs. It is important to note that there is a mandatory lock-in period of 3 years for this fund.

The DSP ELSS Tax Saver Fund is suitable for investors who are willing to remain invested for at least 3 years and are looking for tax benefits along with higher returns. This fund carries a “Very High Risk” rating, so investors should be comfortable with the potential for moderate losses.

Frequently asked questions