Which is the Mutual Fund for ELSS or which is the best Mutual Fund for SIP or which is the best term plan? This is the most common trick to ask secrets from Hemant. 🙂 And as usual my answer is “There is nothing called best – best comes after postmortem”.
If you don’t have much idea about Mutual Fund ELSS (Equity Linked Saving Scheme) – You should read ELSS the best instrument for saving tax.
Do you know “Average Equity markets in US have given return of 9.14% from 1991 to 2010 but what investor got was just 3.27%.”
Can you guess why this happened? Because people were looking for BEST FUNDS & not concentrating on other factors which are more important.
But won’t you like to ask what happened if someone made investments when the sensex touched its highest point in last bull run. If someone had invested Rs 10000 in ELSS Fund on 9th January 2008 (Sensex 20800) & withdrawn it after 3 years on 10th Jan 2011 (luckily Sensex 19100).
Must Read – Compare ELSS Vs PPF
So couple of funds have given negative returns in this period & if you notice in middle of this period funds even lost almost 50% of their value. Equity is the most volatile asset class & it always work like this – if you don’t have risk appetite or if you want that your investments should never go negative, please don’t invest in equity or equity related instruments.
Read – What is Equity?
So we have seen a single period but this cannot be much helpful in any judgment. Let’s see what happened in all 3 year periods since ELSS came to existence – for that we have to understand rolling returns.
Definition of Rolling Returns: The annualized average return for a period ending with the listed year. Rolling returns are useful for examining the behavior of returns for holding periods similar to those actually experienced by investors.
3 year rolling return of ELSS
For example, the three-year rolling return for 1996 covers Jan 1, 1993, through Dec 31, 1996. The three-year rolling return for 1996 is the average annual return for 1993 through 1996.
So you can see there are couple of negative periods here – all 3 year period that are starting from a peak of bull market. Deepest fall, almost a 30% negative in 1997 because this is talking about investments done at the time of Harshad Mehta’s Scam (1993).
Read – High Return Investment
5 year rolling return of ELSS
If we look at 5 year period there is only 1 negative period – ending 2012. If you do a Prima Facie observation – on an average investments has given more than 100% return or doubled in period of 5 years.
If you look both the rolling charts there are a two important learning:
- First, with increase in investment horizon (3 to 5 years) volatility substantially reduces.
- Second, investments done when actual returns were negative have generated a good return. (Check 3 year period)
But question is which fund to invest.
Best ELSS Mutual Fund for 2015
This is just a list of 10 tax saving mutual funds – you can take a decision with your own research. (Top 10 ELSS funds based on assets under management)
Long term Performance of ELSS Funds (absolute return)
|Axis Long Term Equity||77.68||162.59||211.77|
|Birla Sun Life Tax Relief 96||71.13||126.45||108.04||448.84|
|DSP BlackRock Tax Saver||61.97||114.15||119.73|
|Franklin Templeton Franklin India Taxshield||65.81||108.91||139.62||514.53|
|ICICI Prudential Tax Plan Regular||60.10||111.65||124.94||472.73|
|L&T Tax Advantage||53.85||87.54||111.20|
|Reliance Tax Saver||96.51||148.21||176.63|
|SBI Magnum Taxgain||58.83||107.84||88.66||531.88|
Year on year of ELSS Funds
If you have any query relating to ELSS or tax saving – feel free to ask. But please don’t ask which is the “Best ELSS Mutual Fund”. 😉