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Best ELSS funds to invest in FY 2017 – 2018

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Advantages of ELSS funds
Tax Savings under 80C – You can save up to ₹1,50,000 under section 80C in ELSS. This means savings of up to ₹7,500, ₹30,000 & ₹45,000 for investors in tax bracket of (5%, 20% & 30% respectively).

Lowest Lock in – Amongst all the tax savings investment options under section 80C, ELSS has the lowest lock-in period of only 3 Years. To compare, Tax Saving FDs & ULIPs have 5 year Lock-in and PPF has a lock-in of 15 years (with option of partial withdrawal from 6th year).

Equity Exposure – For beating inflation & wealth creation Equities are the best option available; through ELSS funds you get the Equity Exposure with considerably less risk than direct equity investing due to the diversification provided by mutual funds. The returns from Equity are considerably higher than other asset classes over long term.

Tax free Returns – The returns from ELSS funds are completely tax free. Gains from Equity Mutual funds which are redeemed post one year of investment come under Long Term Capital Gains which are tax free. Since ELSS investments can be redeemed only after 3 years, the returns from them are automatically tax free.
Best ELSS funds:

After knowing the benefits of ELSS, now let us analyse three ELSS funds that we have shortlisted for you as they have been good performers in long term.

1.Axis Long Term Equity Direct – Growth

This fund has a strategy of buying quality stocks with a growth bias. The fund focuses on stocks of companies with scalable business models which can provide a high return on capital and secular growth. The portfolio of the fund is tilted towards large-caps, their weight being 65-70 per cent and mid caps being 25-30 per cent. The fund being managed by Mr. Jinesh Gopani has been a consistent performer for many years, however in last year its performance has gone down since it does not prefer to invest in cyclical stocks and sectors. In the long term it has beaten both, the category and benchmark and this should continue to remain so in the coming years too.

2. Reliance Tax Saver Direct – Growth

This is an aggressive ELSS fund and takes on higher exposure to small and mid caps compared to peers. Currently it has around 35% share of small and mid caps in the portfolio. This fund tends to take concentrated position in its top picks which shows the conviction of its fund manager Mr. Ashwani Kumar. The fund’s return have consistently beaten its benchmark and it performance better in bull markets. The small & mid cap exposure makes the funds riskier than its peers, however the 3 year and 5 year returns of the fund has been really good.

3. Franklin India Taxshield Direct – Growth

This fund has performed well over the long term. It invests predominantly in the Large Caps and has limited exposure to mid & small cap stocks (less than 20% currently) due to which it has contained its downside while delivering handsome returns over the long term. This fund is managed by Mr. Anand Radhakrishnan who has a research driven investment approach with a focus on reasonably valued quality stocks. The fund remains invested in equity in all cycles and avoids cash calls. The fund might not provide returns similar to its aggressive peers but it has managed to contain its losses in the bear market while beating its benchmark in 5 out of last 7 years.

You may check the 3 year and 5 year performance of these funds in the below table:

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