Around 23 schemes out of the total 34 schemes underperformed their respective benchmarks in the five-year horizon. The ELSS category has offered an average return of 10.45% in the five-year horizon. The ELSS schemes are benchmarked against NIFTY 50 – TRI, NIFTY 500 – TRI, S&P BSE 100 – TRI, and S&P BSE 500 – TRI. These benchmarks offered around 12.31-12.46% returns in the same time period.
The daily rolling returns of the schemes and benchmarks were calculated starting from May 1, 2018 to May 1, 2023.
ELSS or tax saving schemes help investors to save income tax under Section 80C of the IT Act. One can invest a maximum of Rs 1.5 lakh in a financial year and claim deductions on investments in a financial year. ELSS funds invest in stocks and carry high risk. These schemes have a mandatory lock-in period of three years. This helps investors, especially new and inexperienced ones, to learn about the nature of equity markets and the volatility associated with it.
If you are wondering what is the point of investing in ELSS funds when most schemes are underperforming their benchmarks in the five years, please keep in mind the basic idea behind investing in ELSS funds. When you are investing in an equity funds, including ELSS funds, you are hoping to make double-digit returns over a long period of time. You can see that most of these underperformers also managed to offer double-digit returns. The toppers in the category offered better returns. The category average of 10.45% underscores this aspect.
Note, the above exercise is not a recommendation. One should make an investment/redemption decision based on the above exercise. Historical returns of any scheme do not guarantee future performance. One should also consider the goal, risk appetite, and investment horizon to choose any scheme for investment.
If you are looking for recommendations; see :
Best tax saving mutual funds or ELSS to invest in 2023
