Equity Linked Saving Scheme (ELSS) are popularly known as tax-saving mutual funds. Many people feel that amongst all the instruments that qualify for tax exemption as per Section 80C, ELSS Funds are the best choice. This is because in addition to qualifying for tax exemption (up to Rs 1.5 Lakhs per year) they have a host of other associated benefits.
Benefits of investing in the Best ELSS funds:
- ROI
ELSS Funds have the potential for higher returns as compared to the other tax-saving options available. As these funds invest primarily in equities, they can potentially beat inflation and generate more earnings in the long run. As per a report published by AMFI and CRISIL, the ELSS Fund Performance Index for the last decade is at 11.95%. This is considerably higher than the returns offered by other investment avenues such as Public Provident Fund, National Saving Certificates where the average return is between 7% to 9%.
- Transparency
Mutual Funds are known for their transparency. They are strictly regulated by SEBI. All Asset Management Companies release regular information about the portfolio’s performance. These public disclosures help people to take informed decisions.
- Lock-in period
All tax-saving instruments have a lock-in period before which investors cannot exit the scheme. Else there is a penalty clause for such early redemptions. ELSS has the shortest lock-in period of 3 years. Its counterparts such as PPF, Bank’s tax saving- Fixed Deposits, EPF and NSCs have a minimum holding period of 5 years. Shorter lock-in period translates into faster liquidity.
- Compounding perks
ELSS investors can continue to remain invested even after the completion of the lock-in period. So, if one is happy with the performance of the fund, it is advisable to continue for at least five years. Equity investments optimize their potential in the long-run.
- Exposure to equity
Equity markets can seem very overwhelming for first-time investors. ELSS Funds help such investors to invest in equity without the need of detailed market analysis or understanding. It helps them take baby steps into the world of equities.
- SIP
The USP of Mutual Funds is that it is highly accessible and affordable. One can take the Systematic Investment Plan (SIP) route and invest in ELSS with just Rs. 500.
- Ease of Operation
Investment in ELSS is a cakewalk. The process is simple and not time-consuming. One can easily complete the eKYC process from anywhere and at any time basis their convenience.
Here are the 3 best ELSS Funds by Orowealth to invest:
- Axis Long Term Equity Fund – Direct (G)
Some key highlights of this fund are:
- Rated as a consistent performer across the 1 Year, 3 Years and 5 Years timeline
- Offers higher risk-adjusted returns as compared to benchmark
- Majority of the investment is in Indian stocks (98.62%). In terms of market capitalization, more than 2/3rd of the investment is in large-cap (67.07%) and 23.54% is put into mid-cap stocks.
- Invests across a wide range of sectors. Top three being IT-Software (8.81%), Auto Ancillaries (7.82%) and Automobile (7.81%)
- Fund Manager (Jinesh Gopani) has total 16 years of experience in the capital markets out of which 4 years are in dedicated equity management.
- Asset Under Management (AUM) – Rs. 19,817 crores (May 2019)
- Minimum SIP Amount – Rs. 500
- Annualized Benchmark returns since inception of 12.6%
- IDFC Tax Advantage (ELSS) Fund – Direct (G)
Some key highlights of this fund are:
- Rated as a consistent performer across the 1 Year, 3 Years and 5 Years timeline
- Carries lower risk when compared to benchmark
- Majority of the investment is in Indian stocks (96.4%). In terms of market capitalization, 46.69% is placed in large-cap and 29.41% is put into mid-cap stocks.
- Invests across a wide range of sectors. Top three being Banks (14.99%), IT-Software (9.24%) and Finance (7.42%)
- Fund Manager (Daylynn Pinto) has 12 years of experience and has also undertaken equity research.
- Asset Under Management (AUM)- Rs. 2059.85 Crores
- Minimum SIP Amount – Rs. 1000
- Annualized returns of 14.65% since inception
- Aditya Birla Sl Tax Relief ’96 – Direct (G)
Some key highlights of this fund are:
- Inception Date -29th March 1996
- Rated as a consistent performer across the 1 Year, 3 Years and 5 Years timeline
- Offers higher returns (risk-adjusted) as compared to benchmark
- Majority of the investment is in Indian stocks (95.95%). In terms of market capitalization, 41.28% is placed in large-cap and 40.91% is put into mid-cap stocks.
- Invests across a wide spectrum of sectors. Top three being Pharmaceuticals (14.82%), Banks (9.33%) and FMCG (8.66%)
- Fund Manager (Ajay Garg) has more than 2.5 decades of experience and an in-depth understanding of the Indian equity markets
- Asset Under Management (AUM)- Rs. 1740.84 Crores
- Minimum SIP Amount – Rs. 500
- Annualized returns of 15.11% since inception as compared to category average of 7.81%.
- Fund Size – Rs. 8849.88 crores
Who should invest in ELSS funds?
The ELSS Funds are suited to investors who are looking for:
- Income tax savings
- Capital appreciation in the long-run
- Have moderate to high risk tolerance and are ready for the possibility of moderate losses in the short-term.
So, basically if you are looking for multiple benefits from one investment, then go for it. After all, ELSS fills two needs with just one deed.
