Best ELSS Fund as of April 2022
The ELSS, or Equity-linked Savings Scheme, has the shortest lock-in time of all the alternatives accessible to an investor. When compared to alternative options like as PPF, life insurance plans, and so on, the ELSS mutual fund with the highest returns carries a larger risk. Here are some smart strategies to invest in ELSS mutual funds while lowering your risk.
REAP THE BENEFITS OF THE SIP
Don’t put all of your money into ELSS at the end of the year. These are equity programmes, and the best way to invest in them is through monthly SIPs. However, if you begin in January, you will only be able to complete 2-3 SIPS before the end of the fiscal year. A taxpayer should start a SIP in an ELSS fund in April and continue it throughout the year to avoid being concerned about market volatility.
VERIFY LONG-TERM PERFORMANCE
Don’t be influenced by a scheme’s short-term performance. Before you invest, look at the track record over a long period of time. Investors should not only look at 5-7 years performance of a scheme but also how long the fund manager has been at the helm of the fund
ANALYZE PORTFOLIO FEATURES
ELSS funds aren’t all the same. Some portfolios are heavily weighted toward large-cap equities, while others include a fair balance of large, mid, and small-cap firms. The risk and rewards for investors are also determined by the portfolio mix. The best ELSS funds are divided into three categories. Select a fund that matches your risk level.
DO NOT CHOOSE THE DIVIDEND OPTION.
In the last two years, the tax rules have altered. Dividends and long-term capital gains above *1 lakh are now taxable. While capital gains tax can be managed and adjusted, dividends are added to income and taxed at regular rates. So, in your ELSS fund, don’t choose the dividend option.
BE AWARE OF THE PERFORMANCE.
While holding stock funds for a long time is a solid approach for long-term wealth accumulation, investors must also keep an eye on their portfolios. Long-term underperformers HDFC Taxsaver and SBI Long-Term Equity should have been dropped years ago. Which ELSS fund is for you?
ELSS funds come in different flavours. Pick the one that suits your taste.
VERY HIGH RISK
With over 40% of their corpus in mid- and small-cap stocks, these funds can be very rewarding in bullish times. However, be wary of the volatility.
| FUND | AVERAGE MKT CAP (CR) | 3-YEAR CAGR (%) | 3-YEAR SIP RETURN (%) | 5-YR CAGR (%) | 5-YR SIP RETURN (%) |
| Quant Tax Plan | 94,400 | 38.10 | 54.85 | 25.80 | 35.80 |
| IDFC Tax Advantage | 85,070 | 22.30 | 36.50 | 17.60 | 23.20 |
| BOI AXA Tax Advantage | 65,429 | 26.20 | 31.70 | 19.00 | 22.50 |
HIGH RISK
These funds also have a 30-35 percent allocation to mid- and small-cap stocks. They’ll be less volatile, but they can be just as profitable in rising markets.
| FUND | AVERAGE MKT CAP (CR) | 3-YEAR CAGR (%) | 3-YEAR SIP RETURN (%) | 5-YR CAGR (%) | 5-YR SIP RETURN (%) |
| PGIM India ELSS Tax Saver | 134810 | 20.80 | 31.25 | 16.15 | 21.30 |
| Kotak Tax Saver | 128840 | 20.30 | 28.60 | 15.30 | 20.55 |
| DSP Tax Saver | 113990 | 20.50 | 28.65 | 15.65 | 20.50 |
| Invesco India Tax Plan | 119675 | 17.70 | 23.80 | 15.60 | 18.00 |
MODERATE RISK
These funds invest 75-80% of their assets in large-cap equities, so they will be less volatile. Returns, on the other hand, will be more subdued.
| FUND | AVERAGE MKT CAP (CR) | 3-YEAR CAGR (%) | 3-YEAR SIP RETURN (%) | 5-YR CAGR (%) | 5-YR SIP RETURN (%) |
| Mirae Asset Tax Saver | 162570 | 22.60 | 30.20 | 19.60 | 22.70 |
| Canara Robeco Equity Tax | 209155 | 21..75 | 28.25 | 18.05 | 2175 |
| Axis Long Term Equity | 157580 | 17.50 | 20.50 | 15.80 | 16.95 |
