Top 5 ELSS tax saving Mutual funds for 2018 in India
Looking to save taxes under Section 80C of the Income Tax Act this tax-saving season? Equity Linked Saving Schemes (ELSS) or tax planning mutual fund schemes are ideal to save taxes up to Rs 1.5 lakh under Section 80C.
ELSS is the best tax saving option because:
1. ELSSs come with a shortest mandatory lock-in period of three years. Other investment options like National Savings Certificate and Public Provident Fund permitted under Section 80C have a longer lock-in period.
2. ELSSs invest mostly in stocks which make them ideal for long term wealth creation. The mandatory lock-in can actually be a blessing as it helps many investors, especially the new ones, to weather the volatility in the stock market.
Here are Upwardly recommended top 5 ELSS funds you can invest in 2018.
1. Aditya Birla Sun Life Tax Relief 96
One of the oldest ELSS funds, this fund has generated outperformance over the last 5 years. The fund follows a multi-cap strategy. It hunts for companies run by professional managements, which have predictability of earnings and strong moats. The three-year return is now over 7 percentage points ahead of the benchmark returns and 4 percentage points more than the category returns. The five year record is very similar. The management team has remained very stable since 2006, with Ajay Garg at the helm. A SIP of ₹5,000 p.m. in this fund started 5 years ago is worth ₹5.5 lakhs now.
2. IDFC Tax Advantage (ELSS) Fund
This is a fund that has beaten its benchmark every year except in the year of its launch in 2009. Its record in 2011 showed an ability to contain downside. The fund has beaten its benchmark by sizeable margins of 7 to 8 percentage points over three and five years. After a blip in 2016, it has made a huge comeback, trouncing both its category and benchmark in 2017. A SIP of ₹5,000 p.m. in this fund started 5 years ago is worth ₹5.4 lakhs now.
3. L&T Tax Advantage Fund
This fund has generated good returns in all market phases. Even during the two years — 2008 and 2011 — when the market was in a slump, it has outperformed the benchmark index. Due to its better downside protection, this fund’s risk profile — measured by standard deviation — is lower than the category average and benchmark. Low risk profile and higher return places this fund high on the risk-return parameter. The three-year return is now over 6 percentage points ahead of the benchmark returns and 2 percentage points more than the category returns. The five year record is very similar shows an outperformance of 6 percentage points compared to the benchmark returns and 1 percentage point more than the category returns. A SIP of ₹5,000 p.m. in this fund started 5 years ago is worth ₹5.1 lakhs now.
4. Tata India Tax Savings Fund
The fund’s strategy relies on buying businesses which have compounding characteristics, strong growth potential and a high capital efficiency. The three-year returns are a good 12 percentage points ahead of benchmark returns and 4 percentage points ahead of the category returns. Five-year returns show equally impressive outperformance of 10 and 3 percentage points, respectively. A SIP of ₹5,000 p.m. in this fund started 5 years ago is worth ₹5.3 lakhs now.
5. Principal Tax Savings Fund
It takes a multi-cap approach like most of its peers in the ELSS (equity-linked savings scheme) category and, despite a distinct large-cap tilt, it takes a sizeable exposure to smaller companies. This fund has delivered healthy outperformance over three and five years. With 3-year annualized returns of 13.7% and 5-year returns of 21.15%, these are around 6 percentage points higher than the benchmark returns and 2–3 percentage points more than peer returns. A SIP of ₹5,000 p.m. in this fund started 5 years ago is worth ₹5.3 lakhs now.
Honorable Mention
Axis Long Term Equity Fund
The fund’s investment strategy focuses on buying quality growth stocks. While selecting stocks, the fund looks for superior and scalable businesses, a high return on capital and secular growth. Consistent performance has led to its asset size burgeon from a mere Rs 4 crore at launch to over Rs 16,500 crore. The fund’s three year returns are about 1 percentage point higher and five year returns 9 percentage points more than the benchmark returns. Its performance in 2011, showed an ability to contain losses in a falling market. A SIP of ₹5,000 p.m. in this fund started 5 years ago is worth ₹5.6 lakhs now.
Start your SIP in the best mutual funds at www.Upwardly.in. Happy Investing!!
Originally published at www.upwardly.in on February 22, 2018.
