Equity Linked Savings Schemes (ELSS) are the most popular choice when it comes to section 80C tax deduction on various investments up to ₹1.5 lakh per year from your taxable income because they not only have a history of producing higher returns than traditional investments like Public Provident Fund (PPF), Sukanya Samriddhi Yojana (SSY), National Savings Certificate (NSC), Fixed Deposits (FD), and Employee Provident Fund (EPF) but also have the shortest lock-in period of 3 years among all tax saving investment options.
ELSS Funds are diversified equity funds and are also considered as Flexi cap funds having a tax deduction as an addition. This fund makes investments across sector categories, Large Caps, Mid Caps, and Small Caps by market capitalization. You may invest in ELSS through a SIP, which assures rupee cost averaging like you can with any equity investments.
The historical record of ELSS funds shows that they outperform other tax-saving products in terms of returns while also outperforming inflation. There are approximately 24 ELSS funds on the market, but selecting the one with the best performing angle to invest in requires a lot of factors to consider. Considerations should be made for important variables like investment objective, time horizon, risk tolerance, performance against its benchmark, performance against its category, consistency of performance, fund manager’s experience, AMC track record, expense ratio, exit load, Net Asset Value (NAV), and many others. So, if you’re thinking about investing in ELSS funds in 2023, let’s quickly review 2022 and determine the best performers just for a piece of information.
Based on an interview with CA Manish P Hingar, Founder at Fintoo, the spokesperson said out of almost 35 funds currently available to invest in the ELSS category that helps investors to save tax under Section 80C along with creating long-term wealth, here are the top performing 5 ELSS Mutual Funds that have generated better risk-adjusted returns in the current year 2022 as compared to their peers in the same category.
“Top 5 ELSS funds for the year 2022 are Quant Tax Plan, HDFC Tax Saver Fund, SBI Tax Advantage Fund, Kotak Tax Saver Fund and Nippon India Tax Saver Fund with 1-year return of 14.38%, 13.38%, 10.80%, 9.84% and 9.37% respectively as compared to the 1-year category average of ELSS fund which is mere 4.34%. Although these funds have performed exceptionally well in the current year, only Quant Tax Plan and HDFC Tax Saver Fund have been consistent winners in the long run,” claimed CA Manish P Hingar.
It is further suggested that investors should just not rely on short term performance and should take investment decisions based on long term trajectory and consistent performance of the fund, said CA Manish P Hingar.
According to information from the Association of Mutual Funds in India (AMFI), ELSS funds reported a negative outflow of ₹-253.88 Cr, net AUM of ₹1,58,601.58 Cr, and an average net AUM of ₹1,55,947.40 Cr for the month of November 2022. The ELSS funds saw a positive inflow of ₹385.95 Cr in the month of October, while AMFI has not yet made the figures for December public.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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