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Invesco India Tax Plan’s investing approach makes the fund’s performance stand out
This equity-linked savings plan (ELSS) is primarily driven by bottom-up stock selection with an overlay of top down views and valuations to construct the fund’s portfolio. The portfolio typically has 45-50 stocks and is always well diversified to protect against extreme bottom-up driven outcomes. The three year lock-in instils patience among investors and allows the fund manager to allocate monies into smaller and often younger companies, which have significant growth prospects.
The fund manager follows a proprietary stock categorisation system, which serves as the primary tool for stock selection. Overall, his preference is for companies that demonstrate a healthy return on equity- this is evaluated over a business cycle where appropriate. Sustainability of growth, cash flows, strength of the business model and balance sheet are other important factors along with valuation.
The fund has consistently done better than its benchmark during both bear and bull phase of the markets. The fund contains the downside when the markets fall, which is a hallmark of this fund. All these traits make this fund a good choice for investors who are looking for tax planning fund which is not very aggressive and consistently does better than its benchmark.