Am I getting the right advice from mutual fund advisor?

I am a 25-year-old new investor in mutual funds. I am a medium risk-taker but I can hold fund for at least three years. With the help of an advisor, I started investing through a monthly SIP of Rs 3,000 in Reliance Tax Saver (ELSS) Fund from September 2017. I also made a one-time investment of Rs 20,000 in Reliance Tax Saver (ELSS). I also started a monthly SIP of Rs 3,000 in HDFC Prudence Fund from January 2018. Last month I invested Rs 24,000 in Aditya Birla Sun Life Tax Relief 96 Fund.

I just want to know if I am moving in the right direction. Is my advisor giving me the correct advice? Reliance and HDFC funds are offering very low returns. Kindly give suggestions and comments on my current portfolio.

-- Mukul Karamchandani

A few quick points. One, tax saving mutual funds or Equity Linked Saving Schemes (ELSSs) have a mandatory lock-in period of three years. However, you shouldn’t invest in them with an investment horizon of just three years. You should invest in equity mutual fund schemes, including ELSSs, only if you have a long-term investment horizon (at least five to seven years).

You are currently investing in two ELSS funds and a balanced scheme. As said before, ELSS funds help you to save taxes of up to Rs 1.5 lakh under Section 80C of the Income Tax Act. Balanced schemes are typically recommended to new and conservative equity investors. They invest in a mix of equity and debt and they are relatively less volatile than pure equity schemes that invest the entire corpus in stocks.


We won’t like to comment on your choice of schemes, as we are not privy to your discussion with your advisor.