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How to Select the Best ELSS Funds for Investment?

How to Select the Best ELSS Funds for Investment?
February 21, 2019 Tom Clark

The rate of returns on your ELSS fund depends entirely on you. Seems too hard to believe, doesn’t it? But it’s true. The amount of return that you can expect once your ELSS fund matures, depends entirely on you.

However, you will only be able to gain the high returns that you expect along with saving high taxes when you choose the ELSS fund type correctly.

In this article, we will be looking into the ways you can select the best ELSS funds that would ensure you everything that you hope for in your journey to get closer to your financial dreams.

Let us look at how you can make the choice

  1. Analyze the Risk-Adjusted Performance

Usually, investors go with funds that have shown high returns constantly year after year. However, the historical returns are not able to give an exact picture of the present situation and so the fund performance should always be adjusted towards the risk.

So, instead of looking at the history of the ELSS funds, change the angle and look at it from the perspective of risk-adjusted performance.

  1. Analyze the Performance Consistency

While it is a good move to look at the risk-adjusted performance of an ELSS mutual fund, it is also important to look at the consistency of the performance in terms of how well the fund has been performing since the past 3 to 5 years.

What you should be looking for is an ELSS scheme that has been showing a constant track record since 5 to 10 years of time and is managed by the reliable fund houses or managers.

  1. Select Funds from the Top AMCs

It is very important to know who is the fund manager or the AMC backing your ELSS fund. You should invest in a fund that is backed by one of the top 10 AMCs having a proven track record of a minimum of 5 years.

When you choose to go with the right AMC, you get the support of a fund house that is known to handle difficult situations and keep the returns high.

  1. Refrain From Investing in Multiple ELSS Funds

It is a huge mistake to invest in new ELSS funds every year. In a matter of a few years, while you will have a big portfolio containing multiple ELSS funds, the managing and tracking of it will not just be difficult but impossible.

So, what you should do is invest in 1/2 ELSS mutual funds that are not just short-term performers but constant ones.

  1. Check the Portfolio of ELSS Fund

You should invest in ELSS funds which come with a portfolio that is constant with the financial needs. The ELSS is basically a diversified product that works around sectors such as finance, IT, auto, banking, etc.

Along with this, the portfolio is also made of different risk-based funds, so what you should do is go with a portfolio that is not just made of funds that invest in sectors which you wish to get associated with but also is on the same risk tangent as you are.

  1. Choose the Growth Option instead of Dividend

While it tends to be very tempting to invest in the dividend option as it comes with the option to take the returns out and the benefit of zero lock-in period, what we recommend is investing in Growth option instead.

When you invest in growth based ELSS mutual fund investment, you get the facility to keep your returns invested for it to grow in the long run.

So, here were the different ways you can look for when making an ELSS mutual fund investment. At the end of it all, it depends entirely on the aim you have entered the market with and the risk-taking ability profile to which you belong.

And now that you have seen it all, it is time to choose the best ELSS Mutual Fund scheme that would not just help you save tax but promise a high rate of returns. In case, you need any further help in terms of making the right choice, get in touch with our ELSS experts, today!