where's my money honey

If you had invested in a tax-saving schemes a couple of year ago, there are chances that a large portion your hard earned money might have flowed out of the drain courtesy your inefficient fund managers.
More than 60 per cent of tax-saving schemes available in India for more than two years have been showing negative returns. The average return given by these tax savings mutual funds in the past two years has been -2.25 per cent as on August 10, 2009. The worst performing funds over the two-year period are Fortis Tax Advantage Plan, Principle Tax Savings and ING Tax Savings, each of which has shown a drop of over 28 per cent in the past two years.
So if you had invested Rs 100,000 in 2007 there are chances that you are left with just Rs 72,000 today. If you go by what the fund managers promised you two years back (a minimum of 30 per cent appreciation in three years,that is Rs 130,000), they need to generate Rs 58,000 in the next one year, that is over 80 per cent return in 2009-10.
Over the past one year, the average return of these funds has been –1.05 per cent. Out of the 30 tax savings schemes that have been in existence for over one year, 15 have given negative returns, the worst being JM Tax Gain, which has given a return of –33 per cent in past one year. In the one-year period, Canara Robeco has given the maximum return of over 22 per cent.
Of the 10 fund that gave positive returns in the past two years, the average return has been around 5.3 per cent, which is less than the two-year annualised return of 7 per cent given by fixed deposit schemes of banks.
The best performing funds during the two-year period are Taurus Tax Shield with a return of 15 per cent in past two years, Sundaram BNP Paribas with a return of around 10 per cent and Canara Robeco Equity Tax Saver with 9 per cent return.
Tax-saving mutual fund schemes are diversified equity schemes with a three-year lock-in period compared with five-year lock-in period of bank fixed deposit schemes that offer tax benefits and six-year lock-in of National Savings Certificate (NSC).
Experts says the returns on equity funds depend on market conditions. In the past two year, the Nifty has given a return of 1.18 per cent while the Sensex has given a return of 0.47 per cent. While some funds outperformed the indices, a majority of them underperformed depending on their investment strategies. Fund with exposure to large-cap funds may have done better than those with mid- and small-cap funds.
In the April-June quarter, due to positive market conditions, fund houses have given very high returns, thus making a sort of recovery from the slump that they saw in between January 2008 and March 2009.
The reason for investors’ travails could be overambitious returns target set by fund managers, as the managing director of a large fund house puts it, “Tax schemes of fund houses often invest in mid-cap stocks because of the formers’ medium-term orientation. During the past two years, the return on mid-cap stocks has been either low or negative, leading to negative average return of tax-saving funds.”
In the past two years, the BSE Mid-cap and Small-cap indices have given a return of –9.5 per cent and –12.35 per cent respectively.
So, while you may have saved some money as tax but you may have lost a bigger amount to inefficient fund managers.