Tax saving schemes from MFs

let me introduce to you the Tax saving Schemes of Mutual Funds(MF). upto Rs.1,00,000 investments in Tax saving MF schemes qualify for Tax rebate @ 20% along with other specified investments. There are 3 type of such products from MFs:

1. Equity Linked savings Scheme(ELSS)
2. Uint Linked Insurance Plan(ULIP)
3. Pension funds

Some MFs have multiple ELSS offerings Like HDFC, Principal and UTI. These investments can be repurchased after 3 year lock-in-period only. Otherwise the normal term of investment is 10 years in certain cases and some are Open ended. These schemes are useful as a savings instrument as also a tax saving vehicle.
While investing in any MF, one sholud look at the expenses charged from the investor in terms of initial expense(if it is a NFO), entry load, exit load, fund management expenses. These are all legally valid charges. But is the extent of cahrges warranted? There is no uniformity among funds in charging the customers. some funds charge loads 2.25-2.5%, when some others of same class charge 1.75-2.25%. It is here, the investor should think for himself. Rs 25 NAV fetches 0.9564 unit with entry load where as 1.00 unit without entry load. after 10 years, assuming that you are getting 12% compounded annual growth rate, your investment Rs 25.00 would have grown into Rs.71.02 or Rs. 77.65 depending on whether you got fraction of a unit or a full unit initially.So prefer a no-load fund; if not go for a exit load and not entry load.

When it come to size, it really matters. A very large fund is better than a small fund with same number of unitholders. The large fund can absob scale of economies by sheer size. market shocks mostly get absorbed without affecting the NAV badly. Go for a fund with large corpus than a small corpus.

When you are making an investment for long term, like 10 years, one can be a little lax on the service quotient.
You can read the related Malayalam article in Business Manorama dated January 08, 2007