Equity Linked Savings Schemes or ELSS invest in stocks. These schemes are extremely risky because of this investment strategy. However, they also have the potential to offer superior returns over a long period of time. For example, the ELSS or tax saving mutual fund category offered returns of over 14.21% over a 10-year period. Assuming an annual return of 12%, you can hope to create a corpus of 29 lakhs if you invest Rs 1.5 lakh every year for 10 years.
That brings us to the most important point you should remember if you’re investing in these tax saving mutual fund schemes. Sure, everybody will tomtom about the shortest mandatory lock-in period of three years. However, you should get into these schemes only if you have an investment horizon of at least five to seven years.
That means you should include ELSS investments in your long-term investments. ELSS funds or any equity funds should be only used for your long-term goals as equity can be extremely risky in the short term. There will also be volatile periods. That is why ELSS schemes are recommended only to individuals who are ready to take risk and have a long investment horizon.
If you fit the bill, here are toppers in the ELSS category.
Top ELSS funds in three years
Top ELSS funds in five years
Top ELSS funds in 10 years
If you want to check out our recommendations, you can check out Best ELSS funds to invest in 2023