When a retail investor chooses to invest in a mutual fund scheme, one of the primary reasons for investing is the annual return it can provide over a specific period. While one-year returns may not offer a comprehensive view of a scheme’s potential, returns over a longer period can assist investors in evaluating its investment prospects.
For example, schemes that have demonstrated annualized returns over a period of three or five years are generally considered more attractive to retail investors. Nevertheless, investment professionals frequently recommend that investors take into account factors beyond past returns.
Equity Linked Savings Schemes (ELSS) are tax-saving mutual funds that provide tax benefits under Section 80C while also offering exposure to equity. These schemes come with a 3-year lock-in period and are favored by long-term investors due to their potential for high returns and tax advantages.
ELSS funds are required to invest a minimum of 80% of their assets in accordance with the Equity Linked Saving Scheme (2005) guidelines issued by the Finance Ministry.
As of March 31, 2024, there are a total of 42 ELSS schemes in India with a net AUM of ₹2.13 lakh crore, as per AMFI data. These schemes witnessed an inflow of ₹3,876 crore in March alone. Focusing on twelve Equity Linked Savings Schemes (ELSS) that have delivered annualized returns exceeding 20% over the past three years.
The highest returns of 31% were achieved by Quant ELSS. Tax Saver Fund, followed by SBI Long Term Equity Fund with 28% CAGR returns, as shown in the table below:
ELSS Funds 3-year-returns (%) (regular)
Bandhan ELSS Tax Saver Fund 22.70
Bank of India ELSS Tax Saver Fund 24.92
DSP ELSS Tax Saver Fund 21.29
Franklin India ELSS Tax Saver Fund 23.45
HDFC ELSS Tax Saver Fund 26.79
JM ELSS Tax Fund.
Investors looking to invest in ELSS funds should consider factors such as the fund’s investment objective, portfolio composition, fund manager’s track record, expense ratio, and risk profile. It is essential to conduct thorough research and consult with a financial advisor before making investment decisions to ensure that the chosen scheme aligns with one’s financial goals and risk tolerance.
