Investing Strategically: How to Build a Tax-Saving Portfolio with Mutual Funds

Engaging in tax-saving mutual funds presents a financial strategy that not only holds the potential for wealth accumulation but also serves as a prudent avenue for optimizing one’s tax obligations. In the ever-evolving realm of personal finance, the quest to mitigate the impact of taxes on investment returns remains a paramount concern for investors.

Tax saver mutual funds, exemplified by instruments like Equity-Linked Savings Schemes (ELSS) and debt funds, have surfaced as compelling choices uniquely crafted to bestow upon investors the dual advantage of tax benefits and the appreciation of wealth.

What is a mutual fund?

It is an investment vehicle that allows you to put your financial assets in different baskets and diversify your portfolio, helping you avoid high-risk situations that arise while investing in a single fund.

Mutual funds mitigate risk by dispersing investors’ capital among various assets, ensuring that the performance of a single investment does not hold undue influence. These shares are typically highly liquid, enabling easy purchase and sale, with their value determined at the close of each trading day based on the net asset value (NAV).

How do you build a tax-saving portfolio with mutual funds?

●     Equity-Linked Savings Schemes (ELSS)

ELSS funds present an opportunity for tax savings in compliance with Section 80C of the Income Tax Act in India. These funds come with a mandatory lock-in period of three years and primarily channel investments into the equity market.

●     Fundamental analysis

It is a pivotal process employed by the fund managers of tax-saving funds. They delve deeply into assessing the assets they allocate capital to, encompassing a thorough examination of financial statements, industry dynamics, tax saver mutual funds and the competitive environment.

●     Debt Funds

Debt mutual funds offer a unique advantage in the form of indexation benefits, contributing to potential reductions in your tax obligations. Long-term capital gains from debt funds are subject to taxation with indexation benefits, which factor in the impact of inflation, ultimately minimizing your taxable gains.

●     Tax-Saving Fixed Deposits

Although not classified as mutual funds, tax-saving fixed deposits held in banks can serve as a valuable component of your tax-saving investment portfolio.

●     Long term goals

Many of these tax-saving funds adopt a long-term investment perspective. They remain unperturbed by short-term market fluctuations and typically retain their investments over extended periods, harnessing the benefits of compounding.

Which are the best performing mutual funds?

1.   Quant Cap Small Fund

It is one of the best-performing mutual funds in the equity category, giving up to 31% interest rate.

2.   The Aditya Birla Sun Life Medium Term Plan

It is an open-ended debt fund focused on investments in debt and money market instruments, aiming to deliver favourable returns within its specific category.

3.   SBI Magnum Gift Fund

Similarly, this fund is a debt mutual fund scheme introduced by SBI Mutual Fund.

How to invest in the best-performing mutual funds?

All the funds mentioned above are thebest performing mutual funds today, and you can invest in them through the Bajaj Finserv app, just like me, as it is extremely easy to use because of its user-friendly interface.

Follow the steps written below:

  1. Download the application on your device. It is readily available on both the Play Store and the App Store.
  2. Sign up with your mobile number.
  3. Navigate to the Mutual Funds within the Investment Bazaar category.
  4. Proceed as per your requirement


By leveraging the knowledge of fund managers and taking advantage of diversification, investors can confidently navigate the intricacies of financial markets and, in doing so, potentially reap the benefits of a carefully balanced and meticulously managed investment strategy by investing in the best performing mutual funds today.

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