There are several traditional investments for people to invest in, such as National Savings Certificate (NSC), Public Provident Fund (PPF), Sukanya Samriddhi Yojana (SSY), Fixed Deposits (FD), and Employee Provident Fund (EPF). But in recent times, ELSS or Equity Linked Savings Schemes are preferred over these traditional investment schemes as ELSS allows investments upto Rs 1.5 lakh with a section 80C tax reduction. Because of the tax reduction, there is the possibility of getting higher returns. ELSS favors many types of investments within the shortest lock-in period, that is, three years. These features make ELSS popular and widely profitable.
What are Equity Linked Saving Schemes?
ELSS or Equity Linked Saving Schemes can be defined as diversified Equity Funds. The other name of ELSS funds is Flexi Cap Funds, as it is very flexible and provides the shortest lock-in period of 3 years by mutual funds. The tax deduction is not a regular part of investment schemes, but ELSS is unique. ELSS makes suitable investments across all sectors like Large Caps, Small Caps, and Mid Caps channeled by market capitalization.
The funds need to be invested in a disciplined and safe manner which is why the funds in ELSS can be supported with the help of SIP or Systematic Investment Planner. SIP also guarantees that there will be rupee cost averaging as it should happen in any other equity investment.
The performance history of ELSS
ELSS has a colorful history of outshining other equity investment schemes. Even if those investments can reduce taxes, no one provides better tax-reducing services than ELSS. Equity Linked Savings Schemes is also way ahead in its game of receiving the highest returns as compared to other investment schemes. ELSS has also outperformed other methods in terms of the rising of prices which is termed inflation.
Currently, the market has 24 Equity Linked Saving Schemes at the service of people. But choosing one among them requires a lot of research and acknowledgment of the needs and risks. Many factors would be the best characteristics before selecting a field to invest in with ELSS.
The factors that should be taken care of before investing in ELSS funds are time horizon, risk tolerance, investment goals, ability to perform best, consistency and regularity, good management of funds, Net Asset Value, exit load, and AMC track records. These are the significant factors, but there are so many angles from which these factors should be observed before making the final decision.
Top Ranking ELSS funds in the year 2022
Before deciding on investing in the current year, it is crucial to know about the performance of some top-ranking ELSS funds in the past year. This knowledge will help you to make wise and well-researched decisions that will yield the best results for your objectives.
The top-ranked ELSS funds in the year 2022 are HDFC Tax Saver Fund, Quant Tax Plan, SBI Tax Advantage Fund, Nippon India Tax Saver Fund, and Kotak Tax Saver Fund. These five top-ranked ELSS funds have yielded the highest returns with minimum risk in 2022. These funds have actively helped the investors to profit more while the tax is reduced under Section 80C.
The HDFC Tax Saver Fund has received a one-year return of 13.38%, Quant Tax Plan has acquired 14.38%, SBI Tax Advantage Fund has acquired 10.80%, Nippon India Tax Saver Fund has received 9.37%, and Kotak Tax Saver Fund has received a one year return of 9.84%. This one-year return is enormous compared to the average one-year return of ELSS funds which is only about 4.34%.
Also, the HDFC Tax Saver Fund and Quant Tax Plan have topped the list of best-performing ELSS funds for many years.
The founder of Fintoo, CA, Manish P Hingar, advises investors to research thoroughly and invest in those ELSS funds that are safe in the long run and have given consistent performance. A consistently performing ELSS fund can suit the investor’s objectives and is flexible if any problem occurs in the market.