Analysis Reveals ELSS Performance Over 3-Year Period

ELSS mutual funds are a popular investment option among investors who wants to save tax. Here’s how these funds have fared in the last few years

Equity-linked savings schemes (ELSS) are diversified equity funds that invest primarily in stocks of listed companies across market capitalisation and industry sectors with the aim of maximising capital appreciation over the long run.  

These funds allow one to save on tax while investing for one’s long-term goals, with a tax deduction available of up to Rs 1.5 lakh under Section 80C of the Income-tax Act, 1961.  

ELSS funds have a lock-in period of three years, which is the shortest among all tax-saving options. Their diversified portfolio reduces risk and also ensures that one doesn’t miss out on capital appreciation under any market capitalisation class.

ELSS Performance

ELSS mutual funds have performed well in the past three years in India, according to the latest information from Accord data.  

The average compounded annualised growth rate (CAGR) for top 37 ELSS funds for the period was 25.73 per cent.  

The returns of funds that were analysed varied considerably. For instance, among the top-performing ELSS funds, the Quant Tax Plan (G) stood out with a remarkable CAGR of 44.08 per cent over the three-year period, whereas Aditya Birla SL ELSS Tax Relief 96(IDCW) had a CAGR of only 13.84 per cent.

The Bandhan Tax Advt (ELSS) Fund-Reg (G) and the Parag Parikh Tax Saver Fund-Reg (G) performed comparatively well, with CAGRs of 35.30 per cent and 32.26 per cent, respectively.  

The average return of ELSS funds (25.73 per cent) is significantly higher than many other types of mutual funds, making ELSS funds an attractive investment option for tax-saving investors.  

Regarding the top-performing ELSS funds, HDFC TaxSaver (G), SBI Long Term Equity Fund-Reg (IDCW), and JM Tax Gain Fund (G) earned CAGRs of 29 per cent, 28.59 per cent, and 28.57 per cent, respectively.

Investing in ELSS funds is possible by way of systematic investment plans (SIP), too where investments can be made regularly. 

As ELSS funds are equity mutual fund investments that invest at least 80 per cent of their assets in equity and equity-related instruments, so the returns are highly volatile.

It is also important to note that past performance is not indicative of future results and investors should conduct their due diligence before investing in any mutual fund. Investors should consider their investment goals, risk appetite, and tax-saving needs before investing in ELSS funds.

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