Why Invest in 5 Star Rated ELSS Funds: Investing in Equity Linked Savings Scheme (ELSS) not only saves tax but also gives excellent returns in the long term. Many top rated ELSS funds have given tremendous returns in the last 5 years and have multiplied the capital of investors by 3 to 5 times. Not only this, these funds have also given up to 250% absolute return on investments made through SIP.
Past Performance of Top 4 ELSS Funds with 5 Star Rating
The top 4 ELSS funds with 5 star rating include mutual fund schemes of Quant, SBI MF, Bank of India MF and Parag Parikh.
1. Quant ELSS Tax Saver (Direct Plan)
– Annualized return on lump sum investment over 5 years: 37.73%
Value of lump sum investment of Rs 1 lakh after 5 years: Rs 4,95,613
– 5-year SIP return (annualized): 38.27%
– Value of Rs 5,000 monthly SIP after 5 years: Rs 7,60,611
This fund is one of the highest returning ELSS funds. In the last 5 years, it has given very good returns to investors through both lump sum and SIP. The 3-year return on lump sum investment in this fund has been 27.28% and the 10-year return has been 24.44%.
2. Bank of India ELSS Tax Saver Fund (Direct Plan)
– Annualized return on lump sum investment over 5 years: 29.02%
Value of lump sum investment of Rs 1 lakh after 5 years: Rs 3,57,508
– 5-year SIP return (annualized): 30.39%
– Value of Rs 5,000 monthly SIP after 5 years: Rs 6,32,970
The 3-year return of this fund on lump sum investment is 20.82% and 10-year return is 18.95%.
Also read: This scheme of LIC MF gave 60% profit in 1 year, 6 more dividend yield funds also gave up to 53% return, what is the secret of success
3. SBI Long Term Equity (Direct Plan)
– Annualized return on lump sum investment over 5 years: 27.89%
Value of lump sum investment of Rs 1 lakh after 5 years: Rs 3,42,124
– 5-year SIP return (annualized): 33.84%
– Value of Rs 5,000 monthly SIP after 5 years: Rs 6,86,329
The 3-year return on lump sum investment in this ELSS fund of SBI is 28.63% and the 10-year return is 16.68%.
Also read: Mutual Fund SIP: PSU funds investing in government companies are the stars, up to 49% profit on SIP in 5 years
4. Parag Parikh ELSS Tax Saver (Direct Plan)
– Annualized return on lump sum investment over 5 years: 26.54%
Value of lump sum investment of Rs 1 lakh after 5 years: Rs 3,24,444
– 5-year SIP return (annualized): 28.8%
– Value of Rs 5,000 monthly SIP after 5 years: Rs 6,09,569
This ELSS fund also offers good returns along with tax savings for investors. Its 3-year return on lump sum investment is 21.85%. Direct plan of this fund was not available 10 years ago.
Also read: Value Mutual Fund: Made money more than three times in 5 years, what is the funda of top 10 value funds?
Tax benefits on investment in ELSS funds
ELSS is considered a very good scheme for long term wealth creation as well as tax saving. Under Section 80C of the Income Tax Act, tax exemption is available on investment of up to Rs 1.5 lakh in ELSS during a financial year. The lock-in period of only 3 years of ELSS funds is also the lowest compared to other tax saving schemes. For example, the maturity period of PPF is 15 years and the lock-in period of tax saving fixed deposit is 5 years. After the lock-in of 3 years, no income tax has to be paid on the profit of up to Rs 1.25 lakh in a financial year by selling the units of ELSS fund. If the profit is more than this, then Long Term Capital Gains Tax (LTCG) has to be paid at the rate of 12.5%. This is also beneficial for tax payers falling in higher tax slabs. This is the reason why ELSS funds are considered a very good scheme in terms of tax savings. Apart from this, due to investing mainly in equity, investments made in ELSS funds give much higher returns as compared to PPF and tax saving FDs.
Also read: Mutual Fund vs FOF: How are Fund of Funds different from normal mutual funds? Should you invest in them?
Invest with caution
Despite all the advantages of ELSS funds, it should always be kept in mind that due to investing in equity, market risk is always associated with them. Their returns are not fixed like FD or PPF. Also, the past returns of ELSS funds cannot be considered a guarantee of similar performance in the future. Therefore, while deciding to invest in ELSS, keep your risk profile in mind and always invest for the long term.
(Disclaimer: The purpose of this article is only to provide information about the scheme, not to recommend investment. The past returns of a mutual fund cannot be considered a guarantee of similar performance in the future. Take any investment decision only after consulting your investment advisor.)
