Mutual Funds are a way for a group of investors to pool their money so they can invest in a wider variety of stocks and bonds.

Why is this a good idea? In order to really make wise decisions when you buy individual stocks and bonds yourself rather than buying a mutual fund, you'd have to do extensive research on various types of businesses in general (telecom, automobile, construction, pharmaceutical, oil & gas) and on specific companies (Bharti,Tata Motors, JP Associates, Ranbaxy, Reliance). This is work that most of us are not interested in or may be not capable of doing.

The group of investors forms a mutual fund and hires a fund manager. This manager makes decisions about how to invest the money based on the established goals of the owners of the fund.

Each investor is charged a percentage of his or her investment to help cover all the costs of running the mutual fund, including having a professional fund manager, and researching, buying, and selling stocks. The fees are spread out over all the investors, so the costs to each individual investor is less than it would have been if he or she had purchased the stocks directly.

In a mutual fund, the value of your shares goes up and down as the value of the stocks and bonds in the fund rise and fall.

Not all funds are managed by a financial manager. Index funds use a computer program to buy all of the stock in a particular index, regardless of how they're performing. They don't have to do research or try to time the movement in the market to buy or sell at the "right" time. Index fund fees, therefore, are generally much lower than the fees for managed funds, and therefore the return on investment is higher.

Mutual funds diversify your investments, to some extent, automatically, and they require as little as 500 Rs to 1000 Rs to get started.

For more information, check Saral Gyan (http://www.saralgyan.in/) MF section.

In ELSS category, another scheme which has given good returns is Canara Robeco Equity Tax Saver.

This particular ELSS scheme is well managed by fund manager Mr. Anand Shah delivering consistent performance in terms of absolute returns from last 5 years. Benchmark for the scheme is BSE 100 index. Canara Robeco equity tax saver enjoys 5 star rating by value research.

Looking at last 5 years track record, scheme manages to hold its no. 1 or no. 2 position in ELSS category. Scheme is ranked at 10th position with absolute returns of 95.7 % in last 1 year, holds 1st and 2nd position for the last 3 years and 5 years time period.

Below table provides scheme holdings as on 31st Dec 09.


Sector Allocation and Asset Allocation as on 31st Dec is as under:

Scheme weightage is maximum in oil & Gas sector followed by Banking/Finance and Media sector. All 3 sectors can perform well in future expecting good domestic consumption.

One important aspect which we want to bring in notice is AUM (asset under management). AUM of Canara Robeco Equity Tax Saver is 86.15 Crore, which is significantly low as compared to other fund houses ELSS schemes and any major redemption in the scheme can affect its performance in future.

We suggest SIP (systemetic investment plan) for Canara Robeco Equity Tax Saver scheme looking at its past performance. One time investment may be risky looking at small AUM of the fund.

The asset allocation consists of 2 asset type -
i) Equity and equity related instruments with minimum of 80 % weightage.
ii) Debt securities, money market instruments (including cash/call money) with maximum of 20 %.

Team of 2 fund managers is looking after HDFC tax saver scheme, Mr. vinay kulkarni is managing the fund since last 4 years along with Mr. Anand Laddha.

Overall holdings of scheme as on 30th nov is listed below. Looking at top 10 stocks holding, scheme exposure in banking sector holds maximum with NAV weightage of 14.73 % followed by pharmaceuticals, IT and construction.


HDFC Tax Saver is enjoying either 4 star or 5 star value research rating from last 5 years.

Scheme last one year absolute returns is 104.6%. HDFC Tax Saver scheme ranking in ELSS category is 7th for last one year, 2nd for last 2 years and 4th for last 5 years.

We believe in future also HDFC Tax Saver will outperform its benchmark index and yield maximum returns. Looking at long term prospective, we recommend buy for HDFC Tax Saver in ELSS category.

Equity mutual funds schemes are specially designed to cater to the retail investors desire to invest in stock market. If you don't understand equities market, buying equity mutual funds is probably much better than buying equities themselves. This is because equity MFs mirror the stock market and when the market is going up, the NAVs of the equity MFs also go up. Its always important to understand the types of mutual fund schemes available in the market and which one suits you the most looking at your medium/long term objectives in term of returns.

Below are the types of Mutual Fund Schemes:

1. By Structure

•  Open - Ended Schemes
•  Close - Ended Schemes
•  Interval Schemes

2. By Investment Objective

•  Growth Schemes
•  Income Schemes
•  Balanced Schemes
•  Money Market Schemes

3. Other Schemes

•  Tax Saving Schemes
•  Special Schemes (Index Schemes, Sector Specific Schemes)

Mutual Fund section is useful for those investors, who find it difficult to invest directly in stocks. Exposure to Equity via investing in Mutual Funds is advicable to such investors, various mutual fund schemes are available in the market and investment can be made looking at the requirement of an individual after set time frame in future and also the risk factor he/she can bear.

Below are the posts published in Mutual Fund Gyan section of http://www.saralgyan.in/

• Basics - Mutual Fund
• Types of Mutual Fund Schemes

ELSS Recommendations:

• Start SIP in Canara Robeco Equity Tax Saver
• Buy HDFC Tax Saver

Mostly we find it difficult to invest our hard earned money in stock market because of unexpected returns. If you have ever invested directly in stocks you may find them sometime in red and sometime in green depending upon the price it trades. For a layman, all equity research analysts suggest to invest via Mutual Fund, where money in stock market will be invested by well qualified financial analysts & decision maker known as Fund Managers.