Here are the 6 most consistent ELSS funds
These mutual funds are in top quartile across 1-, 2-, 3-, 5-, 7- and 10-year time periods
Tax-saving equity funds or otherwise known as Equity Linked Savings Schemes (ELSS) are very popular for a multitude of reasons. They offer tax deduction of up to Rs. 1.5 lakh (per financial year) from total income available under Section 80C of the Income Tax Act, 1961. The three year lock-in period enables participation in the long term growth potential of equity markets. Since every fund-house has its own ELSS, it can be difficult to pick and choose the best funds from such a large universe. Instead of going for the best performer, investors should select the most consistent ELSS funds. We looked at various time periods to find out 6 most consistent ELSS schemes. Read on.
Consistency is key
Consistency of returns is an important driver of overall investment results. A fund that does well once in a blue moon is not a reliable vehicle for your hard-earned money.
During bull markets, every equity fund does well. In the last 1 year period, ELSS funds have given between 28-106 per cent gain. There are 20 ELSS funds with atleast 50 per cent returns. Should you go for them? No. It is more important to see how the funds have been able to perform over longer periods.
We looked at point to point returns of all the ELSS funds over 1-, 2-, 3-, 5-, 7- and 10-year time periods. This helped us understand which funds among this large category consistently performed well.
The following is the list of the 6 most consistent tax-savings funds.
* Quant Tax Plan
* IDFC Tax Advantage
* BOI AXA Tax Advantage
* DSP Tax Saver
* Canara Robeco Equity Tax Saver
* JM Tax Gain
Here is a table that illustrates the returns of these 6 most consistent funds. Notice how the 6 ELSS funds selected are always in the top quartile in terms of returns across all the time-periods, showing their consistency.
|ELSS name||1 yr %||2 yr % CAGR||3yr % CAGR||5% CAGR||7yr % CAGR||10 yr % CAGR|
|Quant Tax Plan||106||49||30||23||24||16|
|IDFC Tax Advantage||74||28||15||16||16||16|
|BOI AXA Tax Advantage||67||39||19||19||17||16|
|DSP Tax Saver||62||27||18||16||16||17|
|Canara Robeco Equity Tax Saver||54||29||18||17||15||15|
|JM Tax Gain||54||24||14||16||15||15|
|Category return range||28 to 106||15 to 49||6 to 30||8 to 23||9 to 24||11 to 18|
Do note that some popular ELSS funds like Axis Long Term Equity, Invesco India Tax Plan, BNP Paribas Long Term Equity, ICICI Pru Long Term Equity and HDFC Long Term Advantage do not figure in the most consistent list. The reasons for omission are likely to be the lack of the desired level of consistency in performance.
Be it bull market, bear market or flattish phase, the most consistent ELSS funds such as Quant Tax Plan, IDFC Tax Advantage, BOI AXA Tax Advantage, DSP Tax Saver, Canara Robeco Equity Tax Saver and JM Tax Gain have been able to consistently generate high returns, which is above category average and also many peers.
ELSS funds need to have a minimum investment in equity & equity related instruments of 80% of total assets. This is in accordance with Equity Linked Saving Scheme, 2005 notified by Ministry of Finance. Given the uniformity in standards, portfolios that have generated consistent short, medium and long-term returns should be preferred by investors.