Best ELSS funds to invest in FY 2018 – 2019

top best ELSS funds

Top ELSS funds (Tax Saving mutual fund) to invest in FY 2018-19

ElSS- Equity Linked Savings Scheme is equity mutual funds which will not only help you to save tax but also provides a better opportunity to grow your wealth. Though there are many tax savings options available for investors who want to make use of the exemption limits provided under Income Tax section 80(C), ELSS funds serves as best tax saving mutual funds.

Before jumping into the list of best ELSS funds to invest in 2018-19, let us review the benefits that ELSS fund provides:

Advantages of ELSS funds

  1. Tax Savings under 80C – You can save up to ₹1,50,000 under section 80C in ELSS. This means savings of up to ₹7,500, ₹30,000 & ₹45,000 for investors in tax bracket of (5%, 20% & 30% respectively).
  2. Lowest Lock in – Amongst all the tax savings investment options under section 80C, ELSS has the lowest lock-in period of only 3 Years. To compare, Tax Saving FDs & ULIPs have 5 year Lock-in and PPF has a lock-in of 15 years (with option of partial withdrawal from 6th year).
  3. Equity Exposure – For beating inflation & wealth creation Equities are the best option available; through ELSS funds you get the Equity Exposure with considerably less risk than direct equity investing due to the diversification provided by mutual funds. The returns from Equity are considerably higher than other asset classes over long term.
  4. Tax free Returns – The returns from ELSS funds are completely tax free. Gains from Equity Mutual funds which are redeemed post one year of investment come under Long Term Capital Gains which are tax free. Since ELSS investments can be redeemed only after 3 years, the returns from them are automatically tax free.

We recommend you to consider following factors while deciding to invest in ELSS funds for best returns:

  1. Consistency: Check out the past performance of the fund especially from 2013 when the direct plan was introduced, look at the performance when there are fluctuations in the markets
  2. Composition: Fund composition refers to how the portfolio of the fund is distributed across small, mid and large caps. If the ELSS fund is mostly composed with giant, large cap, it’s regarded as the safest bet, while those composed with small, mid cap are little risky to invest.
  3. Many at times, investors get attracted to the funds that perform in that particular year and invests in them. Investing in a new fund every year is one of the common mistakes which one should avoid.
  4. Ratios:
    Beta: It measures the volatility of the fund given the changes in market. Lower the beta, safe is the fund.
    Sharpe Ratio: Also known as Sharpe Index is a measure of the performance of the investment by adjusting for its risk. Higher the value of this ration indicates greater performance of the fund.

Best ELSS funds:

1. Axis Long Term Equity Direct – Growth

This fund has a strategy of buying quality stocks with a growth bias. The fund focuses on stocks of companies with scalable business models which can provide a high return on capital and secular growth.

Highlights: The portfolio of the fund is tilted towards large-caps, their weight being 65-70 per cent and mid-caps being 25-30 per cent. Since its composition is inclined to large-caps, it’s a safe fund to invest in.

Performance in last few years: This fund has been proved to be as a consistent performer for many years, however in last year its performance has gone down since it did not prefer to invest in cyclical stocks and sectors.

Fund manager: The fund being managed by Mr. Jinesh Gopani. It’s the top performing fund amongst all that he manages right now.

Risk & volatility measures:

The beta and sharpe ratio for this fund as of now stands as 0.82 and 0.48 respectively.

2. Birla Sun Life Tax Relief 96 – Growth

With a great performance record, it has beaten both, the benchmark (S&P BSE 200) & the category 4 times in last 5 years. The fund invests in quality companies and does not limit it to any particular market cap.

Highlights:  The fund takes a multi cap approach and currently has more than 45% exposure to mid caps.

Performance in last few years:  The fund has a track record of more than 21 years and its performance has been very good in last 5 years.

Fund manager: The fund’s performance in the early years was not up to the mark but post 2006 under the fund manager Ajay Garg it has been giving good performance.

Risk & volatility measures:

The beta and Sharpe ratio for this fund as of now stands as 0.89 and 0.64 respectively.

3. Motilal Oswal Most Focused Long-Term Fund

This fund is a relatively new entrant, however its performance since inception has been very impressive and that is the reason of its inclusion in this list. The fund has a multi cap approach with around 30% in midcap and 70% in large cap as of February 2018. Hence the fund is suitable for slightly aggressive investors with a long-term horizon.

Highlights:  The fund has beaten the benchmark and category by a significant margin in trailing as well as month-on-month returns.

Performance in last few years:  The fund has beaten the category comfortably in three year returns and has outperformed it in last 1 year too.

Fund manager: This fund is managed by Mr. Gautam Sinha Roy (for equity component) – He has 14+ years of varied experience in fund management and research.

Risk & volatility measures:

The beta and Sharpe ratio for this fund as of now stands as 0.91 and 1.14 respectively.

Below, we have tabulated the performance of the best elss funds listed above for 3Yr and 5 Yr retruns.

ELSS funds

*Upside/Downside Capture Ratio:

Upside/Downside capture ratio indicates whether a fund has outperformed (gained more or lost less than) a market benchmark.

An upside capture ratio of over 100 indicates a fund has generally outperformed the benchmark during periods of positive returns for the benchmark.

Meanwhile, a downside capture ratio of less than 100 indicates that a fund has lost less than its benchmark in periods when the benchmark has give negative returns.

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 Points to remember

  1. ELSS invests in equities, hence the returns are not guaranteed but in the longer term equities have generated the best returns amongst all asset classes.
  2. ELSS have lock-in of 3 years, hence if you do SIP in ELSS, each installment will be locked in for 3 years.
  3. ELSS is the best tax saving instrument available if your investment horizon is of 5 or more years.

यह ब्लॉग हिंदी में पढ़े- Best ELSS Funds in Hindi.

 

ELSS funds

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