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How to Select ELSS - Equity Linked Savings Scheme?

Equity Linked Savings Scheme are now very popular as tax savings insruments. A complete tax saving option with good returns & just three years lock in period makes it really attractive.

When its time to invest, selecting right fund becomes a tedious job. Its very important to park your funds in right fund as returns vary significantly for different funds.

There are some parametres which one must look & understand while selecting an ELSS Fund. These parametres can guide to select a right fund but still final performance of a fund can not be assured.
Past performance of the Fund-
Though its not necessary that the fund will earn the same as in past but still past performance plays a vital role. Performance of a fund for past 3 to 5 years shall be considered. Compare the past 3-5 years performance of the fund with other benchmark mutual funds. Avoid funds which are with a past record of less than 3 years. 
Track record of the Fund Manager-

In our opinion funds that have a team for fund management rather then a single fund manager shall be better. A good fund managemt team/fund manager will be able to invest funds intelligently and thereby generate stable returns even in the low periods. 

AUM (Asset under Management)-

Though it cant be said that funds with higher AUM perform better, still in our opinion funds having higher AUM should be safer & if there team of fund mangers is smart, they should be able to perform better.

Established Fund Houses-

It is better to chose an established fund house especially when you want to consider risk factor. Established fund houses generally have stable returns. Its easy to track & compare the past records of established funds.

  • Dont invest all your funds in a single fund, instead diversify your portfolio to 3-4 schemes. 
  • Go for growth options of ELSS.
  • Investing for a longer term say 5-6 years is better for maximum returns.

Above parameters can guide to decide about the ELSS which may possibly have good returns but nothing is guaranteed. ELSS funds are also subject to market risks. Its recommended to research well before finalizing your ELSS fund house.

What are ELSS-Equity linked savings scheme?

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