As we enter a new year, it’s time to assess our financial goals and explore investment options that can help us achieve them. One such option that has gained significant popularity in recent years is Equity Linked Saving Scheme (ELSS). ELSS not only offers potential returns but also provides tax benefits under Section 80C of the Income Tax Act. If you’re considering investing in ELSS funds in 2023, it’s essential to understand their benefits, compare the top-performing funds, and seek expert advice. Additionally, choosing the right investment mode, whether lump sum or Systematic Investment Plan (SIP), can further enhance your investment journey.
In this article, we will navigate through the best ELSS funds for investment in 2023, compare their performance and expense ratios.
Understanding ELSS and Its Benefits for Tax Reduction
ELSS, or Equity Linked Saving Scheme, is a tax-saving investment option that offers several benefits for reducing tax liabilities. For potential investors, understanding the advantages of ELSS can help make informed decisions about their long-term financial goals.
One key benefit of investing in ELSS is the potential for higher returns, especially during bullish market trends. Unlike other tax-saving instruments like fixed deposits, public provident funds, or national savings certificates, ELSS has the potential to generate returns ranging from 15% to 18%. This makes it an attractive option for individuals looking to maximise their investments.
Image Source : UnSplash
Another advantage of ELSS is its relatively short lock-in period of just three years. This means that investors can access their funds sooner compared to other tax-saving schemes with longer lock-in periods. The flexibility of ELSS allows individuals to meet their financial goals in a relatively shorter timeframe. Furthermore, ELSS offers attractive post-tax returns compared to other tax-saving options. This means that even after considering the tax implications, ELSS can provide higher net returns for investors. The potential for higher returns combined with the tax benefits makes ELSS a popular choice among individuals seeking to optimise their tax savings.
It’s important to note that ELSS investments can be made through different modes, such as lump sum or systematic investment plan (SIP). While investing through an SIP is advisable for those who are not willing to take higher risks, a lump sum investment may be suitable for individuals with a longer investment horizon and a higher risk appetite. To make the most of ELSS investments, it’s crucial to select the best-performing ELSS schemes. Conducting thorough research, considering factors such as fund performance, expense ratio, and expert opinions, can help investors identify top-rated ELSS funds for their investment portfolio.
Top 10 Best-Performing ELSS Funds for 2023
Fund Name | 3Y Returns | Expense Ratio |
DSP ELSS Tax Saver Fund (G) | 21.5% | 1.69 |
Mirae Asset ELSS Tax Saver Fund (G) | 18.9% | 1.61 |
Union Tax saver ELSS Fund (G) | 20.8% | 2.35 |
Bank of India Tax Advantage Fund (G) | 22.7% | 2.27 |
Canara Robeco Equity Taxsaver fund (G) | 18.8% | 1.75 |
Kotak ELSS Tax Saver Scheme (G) | 20.8% | 1.80 |
Bandhan ELSS Tax saver Fund (G) | 26.7% | 1.79 |
PGIM India ELSS Tax Saver Fund (G) | 21.0% | 2.33 |
Quant Tax Plan (G) | 33.2% | 1.85 |
Nippon India Tax Saver ELSS Fund (G) | 23.1% | 1.72 |
Table Source : Scripbox
Comparing ELSS Funds: Fund Performance, Expense Ratio, and Returns
When considering investing in ELSS funds, there are several factors to take into account. In the previous section, we discussed the fund performance, expense ratio, and returns of ELSS funds. Now, let’s delve deeper into these factors and explore how they can help potential investors make informed decisions.
ELSS funds have gained popularity among investors due to their potential for high returns and tax-saving benefits. These funds are a type of mutual fund that offers tax benefits under Act. By investing in ELSS funds, investors can reduce their tax liability while also potentially earning attractive returns.
One important factor to consider when comparing ELSS funds is their fund performance. This includes analysing the fund’s historical returns and comparing them to benchmark indices. It is essential to evaluate how the fund has performed over different time periods and in various market conditions. This analysis can provide insights into the fund’s consistency and ability to generate returns. Another key factor to consider is the expense ratio of the ELSS funds. The expense ratio is the annual fee charged by the fund house for managing the fund. A lower expense ratio can lead to higher returns for investors. It is important to compare the expense ratios of different ELSS funds to ensure that investors are getting the most value for their investments.
In addition to fund performance and expense ratio, it is also important to consider the returns offered by the ELSS funds. This includes analysing the fund’s past performance and comparing it to other similar funds in the market. Investors should look at the fund’s returns over different time periods, such as 1-year, 3-year, and 5-year returns, to get a comprehensive understanding of its performance. Investors should also consider the risk associated with the ELSS funds. This includes analysing the fund’s volatility and understanding the potential for loss. It is important to assess the risk tolerance and investment goals before investing in ELSS funds. Consulting with a financial advisor or conducting thorough research can help investors make informed decisions based on their individual financial situations.
Choosing the Right Investment Mode for ELSS: Lump Sum vs. SIP
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When it comes to investing in ELSS (equity-linked savings scheme), potential investors often face the dilemma of choosing between lump sum and SIP (Systematic Investment Plan) modes. Understanding the differences and benefits of each mode is crucial in making an informed decision. The main difference between SIP and lump sum investments lies in the cash flows. With a lump sum investment, an investor puts in a significant amount of money at once. On the other hand, SIP allows investors to invest a fixed sum on a regular basis, which can be monthly, quarterly, or annually. This regular investment helps inculcate financial discipline and ensures consistent investment over time.
One of the key advantages of investing through SIP is rupee cost averaging. Since the investment is spread over a period of time, the average cost of investing comes down. This means that SIP investments are less affected by market volatility. Additionally, SIP investments prevent the problem of market timing as they provide more units when the market is down, resulting in lower average costs and higher returns in the long term. Flexibility is another benefit of SIP investments. Investors have the freedom to stop, pause, change the investment amount, and even withdraw any amount from their SIP. This flexibility allows investors to adjust their investment strategy based on their financial goals and market conditions.
While SIP is generally recommended for its benefits, it may not be suitable for debt funds. Debt funds tend to have lower volatility and are less affected by market fluctuations. In such cases, a lump sum investment may be more appropriate, especially if there are surplus funds available. When deciding between SIP and lump sum investments for ELSS, it is important to consider individual financial goals and market conditions. Each mode has its own advantages, and the choice should be based on factors such as investment horizon, risk tolerance, and expected returns.
Disclaimer: The content provided in this article by Qrius is intended for informational purposes only. It does not constitute financial advice. Readers are encouraged to conduct their own research and consult with a qualified financial advisor before making any investment decisions. The platform disclaim any responsibility for any consequences, financial or otherwise, arising directly or indirectly from the use of information provided in this article.
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