ELSS Mutual Funds: Best funds with up to 50% returns in 2024! See top-10 list of tax-saving funds

ELSS Mutual Funds: Today, investors have a wide range of options, including fixed deposits, debt instruments, equities, real estate, and more. While some investments, like bank fixed deposits, offer fixed returns in the range of 7% to 8%, these returns may not meet the expectations of all investors. On the other hand, options like equities, whether directly or through mutual funds, can deliver higher returns but lack the assurance of fixed returns.

In such a scenario, Equity-Linked Savings Schemes (ELSS) stand out by offering the potential for higher returns typically associated with mutual funds, along with the added benefit of tax savings.

What is ELSS Fund and how to invest?

Through an ELSS, which is also called tax-saving mutual fund, investors put their money into equity and equity-related instruments. ELSS funds are a popular choice for long-term investors because they offer the potential for high returns and tax savings.

ELSS funds offer tax benefits under Section 80C of the Income Tax Act, allowing deductions of up to Rs 1.5 lakh. They have a three-year lock-in period, after which they become open-ended equity schemes. While there’s no cap on the investment amount, you can start with as little as Rs 500, investing either as a lump sum or through a Systematic Investment Plan (SIP).

Also read: Mirae Asset Mutual Fund’s rare feat: Rs 2 lakh crore AUM, 69 schemes, 68 lakh folios!

How to choose the best ELSS Mutual Fund for investment

One needs to choose the right ELSS fund after conducting thorough research, though it doesn’t guarantee success. There are key parameters to consider when selecting an ELSS fund. Asset Under Management (AUM) is one of them, as a larger AUM often indicates investor confidence. The fund’s performance ranking over time helps gauge its consistency. Investors should also analyze ratios like Sharpe and alpha to understand risk-adjusted returns. Additionally, factors such as the Total Expense Ratio (TER) and the fund manager’s track record and expertise can help investors make an informed choice.

5 common mistakes to avoid while investing in ELSS:

No need to exit after 3 years:

Many people make this mistake of redeeming their fund units once their investment completes three years, ELSS funds have a mandatory three-year lock-in period. So remember that you do not have to redeem funds immediately after the lock-in ends. Instead, time your exit well as holding investments longer always yield better returns.

Avoid last-minute investments:

Another common mistake people make is investing towards the end of the financial year in a bid to save tax. As they make the investment decision in haste, they often end up selecting the wrong funds or buying units at a higher price due to an uptrend in the market.

Limit the number of ELSS funds:

Many people invest in too many ELSS funds which become difficult to track due to factors like managing performance, monitoring benchmarks, and reviewing portfolios. Investors must focus on fewer and high-quality funds.

Invest through SIPs:

Systematic Investment Plans (SIPs) instill financial discipline in an investor. SIPs also give them the advantage of rupee-cost averaging, reducing the impact of market volatility over time.

Stay within your risk appetite:

ELSS funds are equity-oriented, thus have inherent market risks. It’s crucial to align investments with financial goals and risk tolerance to avoid undue stress and ensure stable, long-term growth.

Also read: Top 10 SBI mutual funds in 2024: Equity funds deliver up to 47% returns in 1 year – Check full list

Here, we will take a look at top 10 ELSS funds based on the last 1-year performance. Data is sourced from Value Research.

Motilal Oswal ELSS Tax Saver Fund

1-year return: 49.62%

Return since launch in Jan. 2015 – 18.85%

Assets under management (AUM) – Rs 4,187 crore

SBI Long Term Advantage Fund Series V

1-year return – 43.66%

Return since launch in March 2018 – 16.48%

Assets under management (AUM) – NA

HSBC Tax Saver Equity Fund

1-year return – 34.61%

Return since launch in January 2007 – 13.35%

Assets under management (AUM) – Rs 260 crore

HSBC ELSS Tax Saver Fund

1-year return – 34.18%

Return since launch in Feb. 2006 – 14.83%

Assets under management (AUM) – Rs 4,303 crore

SBI Long Term Equity Fund

1-year return – 30.83%

Return since launch in January 2007 – 17.17%

Assets under management (AUM) – Rs 27,847 crore

ICICI Prudential Long Term Wealth Enhancement Fund

1-year return – 29.32%

Return since launch in March 2018 – 16.53%

Assets under management (AUM) – NA

JM ELSS Tax Saver Fund

1-year return – 29.14%

Return since launch in March 2008 – 9.92%

Assets under management (AUM) – Rs 183 crore

WhiteOak Capital ELSS Tax Saver Fund

1-year return – 29.08%

Return since launch in October 2022 – 27.72%

Assets under management (AUM) – Rs 309 crore

SBI Long Term Advantage Fund Series III

1-year return – 28.99%

Return since launch in March 2016 – 18.84%

Assets under management (AUM) – NA

SBI Long Term Advantage Fund Series I

1-year return – 28.64%

Return since launch in Feb. 2015 – 15.97%

Assets under management (AUM) – NA

Disclaimer: The above content is for informational purposes only. Mutual Fund investments are subject to market risks. Please consult your financial advisor before investing.