Here we come to the best investing avenue for today’s investors. ELSS funds have been in limelight for their superior performance and with equity markets putting a strong and show the going is get to be good in the future too.
Why ELSS(Equity-Linked Saving Scheme) is the best Investment Strategy for Tax savings ?
1. Generates highest returns as compared to other Investing avenues
2. Provides a lock in period of Three years which is the minimum for any tax saving avenue.
3. Dividend option enables liquidity since investor gets tax free dividends during the tenure.
4. ELSS can also be seen as a way to long term investing in equity markets.
5. With India growth story unfolding and fundamentals looking intact, Investment Guru is of the view that equities would continue to outperform other investing avenues for at least next 5-7 years. Investing in ELSS provides dual benefit of capitalizing on superior returns as well as tax saving.
Why risk does ELSS pose to an Investor?
The basic risk with ELSS scheme is that since it has a considerable equity exposure, the returns are linked to market returns and hence there is no guarantee of returns and even capital.
However, I feel that this is more of a precautionary statement and needs to be reviewed in broader sense. If we choose an ELSS schemes which has delivered excellent performance in past years and has a track record of consistent results, the chance of investors loosing out would be negligible.
Choosing the best ELSS fund
Now since we have got an understanding that ELSS is a good option, let’s see how to pick a good ELSS scheme. Let’s put some filters to test the dependability of a good scheme.
1. The scheme should have an excellent track record in terms of returns generated.
2. The return generated should be seen for a 3 years timeframe since the lock in period is three years. Good returns generated on a 3 years plus timeframe would be an added advantage.
3. The returns should be delivered on a consistent basis. Hence ELSS funds with volatile returns would loose out to the one who deliver good performance year on year.
4. The fund should not have seen exodus of talent on a frequent basis. The fund should have strong processes in place to take care of management crisis.
Top 5 Equity-Linked Saving Scheme (ELSS)
- SBI Magnum Taxgain
- HDFC Long term Advantage Fund
- HDFC Tax Saver
- Birla Equity
- Franklin India Taxshield
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