Investing in equity-linked savings schemes (ELSS) mutual funds is one of the best tax-saving options for Indian investors. ELSS funds not only offer tax benefits but also have the potential to generate higher returns in the long run. In this blog, we will discuss the best ELSS mutual funds to invest in 2021.
Axis Long Term Equity Fund:
Axis Long Term Equity Fund is a top-performing ELSS fund that has consistently delivered impressive returns over the years. It has a diversified portfolio that invests in high-quality growth stocks, making it a safe and reliable investment option. The fund has a 5-star rating from Value Research and has generated an average return of 20.3% over the last five years.
Mirae Asset Tax Saver Fund:
Mirae Asset Tax Saver Fund is another top-performing ELSS fund that has delivered consistent returns over the years. The fund has a diversified portfolio of high-quality stocks that are selected based on their growth potential and valuation. The fund has a 5-star rating from Value Research and has generated an average return of 19.7% over the last five years.
Aditya Birla Sun Life Tax Relief 96:
Aditya Birla Sun Life Tax Relief 96 is a well-diversified ELSS fund that invests in high-quality growth stocks across various sectors. The fund has a proven track record of delivering consistent returns over the years and has a 5-star rating from Value Research. It has generated an average return of 20.6% over the last five years.
DSP Tax Saver Fund:
DSP Tax Saver Fund is a high-performing ELSS fund that has a diversified portfolio of growth stocks across various sectors. The fund has consistently delivered impressive returns over the years and has a 5-star rating from Value Research. It has generated an average return of 18.4% over the last five years.
ICICI Prudential Long Term Equity Fund (Tax Saving):
ICICI Prudential Long Term Equity Fund is a well-diversified ELSS fund that invests in high-quality growth stocks across various sectors. The fund has a proven track record of delivering consistent returns over the years and has a 5-star rating from Value Research. It has generated an average return of 17.8% over the last five years.
Performance: One of the most crucial factors to consider while investing in any mutual fund is its historical performance. The ELSS funds listed above have consistently delivered impressive returns over the years, making them a reliable investment option.
Diversification: Diversification is a crucial factor to consider while investing in any mutual fund. The ELSS funds listed above have a well-diversified portfolio of high-quality growth stocks across various sectors. This diversification helps mitigate risk and ensure consistent returns over the long term.
Fund Manager: A skilled and experienced fund manager is an essential element of any mutual fund scheme’s success. The fund managers of the ELSS funds mentioned above have proven track records of generating superior returns and managing risk effectively.
Tax Benefits: ELSS funds offer investors a tax benefit under Section 80C of the Income Tax Act. Investments up to INR 1.5 lakhs are eligible for a tax deduction, making ELSS funds a great investment option for tax-saving purposes.
Low lock-in period: ELSS funds have a lock-in period of three years, which is the lowest among all tax-saving investments eligible for deductions under Section 80C.
it’s crucial to remember that past performance does not guarantee future returns. It’s essential to do thorough research, analyze a mutual fund’s investment philosophy, and consult with a financial advisor before investing in any mutual fund scheme. Moreover, it’s crucial to have a long-term investment horizon while investing in ELSS mutual funds to reap their full potential benefits.
Certainly, here are a few more points to consider while investing in ELSS mutual funds:
Expense Ratio: The expense ratio of a mutual fund scheme is the fee charged by the fund house for managing the fund. It’s essential to consider the expense ratio while investing in any mutual fund scheme as it can eat into your returns. The ELSS funds listed above have a reasonably low expense ratio compared to other mutual fund schemes, making them a cost-effective investment option.
Asset Under Management (AUM): The AUM of a mutual fund scheme is the total amount of money invested in the scheme by investors. A higher AUM indicates that the scheme is popular among investors, and the fund house has more resources to manage the scheme effectively. The ELSS funds listed above have a reasonably high AUM, indicating their popularity among investors.
Risk Level: ELSS funds are equity-oriented mutual funds and are subject to market risks. It’s essential to consider the risk level of a mutual fund scheme before investing in it. The ELSS funds listed above have a proven track record of managing risk effectively and delivering consistent returns over the long term.
Investment Horizon: ELSS funds are long-term investment options and are best suited for investors with a long-term investment horizon. It’s crucial to have a clear investment horizon while investing in ELSS funds to reap their full potential benefits.
SIP Investment: Systematic Investment Plans (SIPs) are an excellent way to invest in mutual fund schemes. It allows investors to invest a fixed amount of money at regular intervals, reducing the impact of market volatility. The ELSS funds listed above offer SIP investment options, making them a convenient investment option for investors.
Conclusion
ELSS mutual funds are an excellent investment option for Indian investors looking to save taxes while generating wealth over the long term. However, it’s essential to do thorough research, analyze a mutual fund’s investment philosophy, and consult with a financial advisor before investing in any mutual fund scheme.
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