Sunday, July 24, 2005
Reliance Tax Saver (ELSS)- Reliance Mutual fund
What type of investors should go in for the fund? Remember the scheme is pure equity scheme. Hence those are risk averse and can not bear the risk associated with Equity, the scheme is no-no.
Another view point is that every investor in the accumulation stage should have equity in his portfolio of investment. The renowned personal finance advisor Bogle ( His bio is available here), says that in asset allocation, as a thumbrule, the asset class of the investor in debt should be equal to his age. Going by the above thumb rule, even if you are aged 40, your standard asset portfolio may consist of 40% debt instruments and 60% in equity. Hence this investment is suitable for all those who are in accumulation and consolidation stage.
The scheme is meant as a tax saving measure. Hence has a lock in period of 3 years indicating that you stay invested in 3 year horizon in the equity. This period is considered as reasonable and optimum for investing in equity markets. Hence the possibilities of obtaining optimum returns exists.
How much to invest?
Another view point is that every investor in the accumulation stage should have equity in his portfolio of investment. The renowned personal finance advisor Bogle ( His bio is available here), says that in asset allocation, as a thumbrule, the asset class of the investor in debt should be equal to his age. Going by the above thumb rule, even if you are aged 40, your standard asset portfolio may consist of 40% debt instruments and 60% in equity. Hence this investment is suitable for all those who are in accumulation and consolidation stage.
The scheme is meant as a tax saving measure. Hence has a lock in period of 3 years indicating that you stay invested in 3 year horizon in the equity. This period is considered as reasonable and optimum for investing in equity markets. Hence the possibilities of obtaining optimum returns exists.
How much to invest?
Comments:
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I'd like to highlight a different portfolio allocation rule - one that Benjamin Graham postulated in the Intelligent Investor - that your equity allocation should ALWAYS be between 25-75% of your portfolio depending on your life circumstances, not on your age.
If you are old but have no dependents, a steady and adequate income stream and a decent amount of savings, you'd be more willing to take risks and could have a high equity allocation. On the other hand, a person in his late twenties, saddled with loans and a wife, parents and children to support would be better off with little equity and more debt.
Allocating debt according to your age is a commonly-accepted rule, but might not be the best choice as the above examples illustrate.
If you are old but have no dependents, a steady and adequate income stream and a decent amount of savings, you'd be more willing to take risks and could have a high equity allocation. On the other hand, a person in his late twenties, saddled with loans and a wife, parents and children to support would be better off with little equity and more debt.
Allocating debt according to your age is a commonly-accepted rule, but might not be the best choice as the above examples illustrate.
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# posted by 
: 12:02 PM
: 12:02 PM
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