ELSS funds give the highest returns while saving tax.

And the best ELSS funds – they have given returns that no other tax saving options have given.

ELSS is a category of mutual fund that the government created to encourage long-term investing in equity.

In order to improve equity participation, the government allowed investment in equity-oriented mutual funds to be tax deductible through ELSS schemes in India.

ELSS stands for Equity Linked Savings Scheme.

All You Need to Know About ELSS funds.

An ELSS fund manager invests in a diversified portfolio, predominantly consisting of equity and equity related instruments that carry high-risk and have the potential to deliver high returns by investing in best tax saving mutual fund 2018.

Top 3 ELSS Funds of 2018 – At a glance

Top 3 ELSS Funds of 2018 - At a glance
Fund Name 1Y 3Y 5Y Category Risk
Aditya Birla Sun Life Tax Relief 96 - Direct - Growth -0.82% 13.77% 21.25% Equity
(ELSS)
Moderately High
Axis Long Term Equity Fund - Direct - Growth 4.61% 12.75% 22.08% Equity
(ELSS)
Moderately High
ICICI Prudential Long Term Equity Fund (Tax Saving) - Direct - Growth 3.69% 11.12% 18.16% Equity
(ELSS)
Moderately High

ELSS mutual funds are getting very popular with users because of the benefits they offer – higher returns, lower lock-in and lower minimum investments.

The best ELSS mutual fund allows investors to save tax and also provides an opportunity for long-term capital appreciation.

The best tax saving mutual fund 2018, you need to invest in, are :

Aditya Birla Sun Life Tax Relief 96 Fund

This is one of the best and most popular ELSS funds to invest in 2018.

Here are the key features of Aditya Birla SL Tax Relief 96 

  • This fund has been rated as a 5-star fund by Groww and is among top 3 ELSS funds.
  • AUM of close to ₹6187 Cr.
  • Age is nearly 10 years. So its performance can be easily judged.
  • Has consistently outperformed its benchmark S&P BSE 200 Fund since its launch.
  • The top portfolio holdings of the fund include Sundaram Clayton Ltd., Honeywell Automation India Ltd., Gillette India Ltd., Bayer CropScience Ltd., etc.
  • The holdings are balanced across various sectors with maximum weight given to the Consumer Goods (20%) followed by Financial Services (18.8%), and Pharma (13.6%).
  • Minimum SIP amount = ₹500
  • Equity share = 96.7% , Debt share = 0% and Cash = 3.3%.

aditya birla 96

  • Large Cap share = 39.5%, mid cap share = 57.1% and small cap share = 0.1%.

aditya birla sl tax 96 large small mid

About Fund Manager  

This fund is managed by Mr. Ajay Garg since Oct 2006.

Education: Mr. Garg is B.E (Electronics) and MBA (Finance).

Experience: Prior to joining Birla Sun Life AMC in 2003 he has worked with Birla Sun Life Securities Ltd.

Other Funds Managed by Ajay Garg

Analysis

One of the oldest and best tax saving mutual fund 2018, sported a three-star rating for many years but has shown improvement in performance since 2014, climbing to a five-star rating recently.

The fund follows a multi-cap strategy.

The strategy is bottom-up and uses a 360-degree view of a company in order to invest in compelling businesses, without any market cap bias.

The investment philosophy of the fund is to invest in quality companies.

It hunts for companies run by professional management, which have the predictability of earnings and strong moats.

The portfolio reveals quite a few unconventional mid-cap picks as top holdings. The fund’s quality bias has also led to a number of MNC stocks figuring among stock choices.

Should you invest in ELSS funds once you have retired?

Axis Long Term Equity Fund

This, one of the best ELSS funds to invest in 2018.

Here are the key features of Axis Long Term Equity Fund:

  • This fund has been rated as a 4-star fund by Groww is among top 3 ELSS funds.
  • AUM of close to ₹ 17,299 Cr.
  • Has consistently outperformed its benchmark S&P BSE 100 Fund since its launch.
  • The top portfolio holdings of the fund include Future Retail, Bajaj Finance, RBL Bank, IndusInd Bank, Menda Industries, etc.
  • Minimum SIP = ₹500
  • Equity share = 96.5%, debt share = 3.2% and cash = 0.3%.

  • Large cap share= 70.4%, mid cap share = 25.8% and small cap share = 0.1%.

axis long term

About Fund Manager:  

This fund is managed by Mr. Jinesh Gopani since 2011.

Education: He has completed his B. Com (H) and MMS from Bharati Vidyapeeth Institute of Management Studies and Research.

Experience: Jinesh Gopani has worked with Aditya Birla Sun Life AMC, Voyager India Capital Pvt. Ltd., Emkay Shares & Stock Brokers Limited and Net worth Stock Broking Limited.

Funds Managed :

Analysis:

One of the best performing ELSS funds.

This fund has performed consistently through the years.

Around 25% of its investments are in mid-cap funds. It has invested mostly in large-cap funds.

ICICI Prudential Long Term (Tax Saving) Fund

This, one of the best ELSS funds to invest in 2018.

Here are the key features of IDFC Tax Advantage Fund:

  • This fund has been rated as a 4-star fund by Groww and is among top 3 ELSS funds.
  • AUM of close to ₹5258 Cr.
  • Has consistently outperformed its benchmark S&P BSE 100 since its launch.
  • The top portfolio holdings of the fund include ITC, State Bank of India, NTPC, Infosys, etc.
  • The holdings are balanced across various sectors with maximum weight given to the Financial Services (22.8%) followed by Pharma (14.2%) and Consumer Goods (12.0%).

  • Minimum SIP = ₹500
  • Equity share = 95.2%, debt share = 0%, and cash = 4.8%.

  • Large-cap share = 70.1%, mid-cap share = 23.2%, and small-cap share = 0.5%.

icici pru tax

About Fund Manager:  

This fund is managed by Mr. George Heber Joseph since Apr 2015.

Education: Mr. Joseph has completed B.Com, B.A.(English language & literature). He is also an associate member of Chartered Accountants of India and an associate member of Cost and Management Accountants of India.

Experience: Before ICICI Prudential, Mr Joesph has worked at DSP Merill Lych Ltd.,Wipro Technologies, MetLife Insurance Co., Cholamandalam Fin Co. Ltd., and with Tanfac Ind. Ltd.

Other Funds Managed:

Analysis:

Another very good mutual fund to feature on this list, ICICI Prudential Long Term Equity Fund has performed well consistently.

It has invested heavily in the Financial Services sector which is expected. In the second place, it has also invested heavily in the Pharma sector which many believe is due for a good rise.

It has invested nearly 3/4rth of its AUM in large-caps while investing the rest in mid-cap funds. A very small percentage is also invested in small-cap funds.

Read more: 10 Best Tax Saving (ELSS) Mutual Funds for 2018

Best way to Invest in ELSS

ELSS gives 2 options for investments.

First through a lump sum and second through Systematic Investing Plan (SIP).

You can either invest in small monthly installments called SIP or in one go called lump sum investment.

Read More: 13 Things to Know About SIP.

Tax planning investments are something that a taxpayer has to make every year.

SIPs are advantageous in that respect.

If you select a good ELSS fund and start a monthly SIP based on your tax planning requirements, you can take care of your tax planning investments, at the least the portion related to ELSS, with a small one-time effort.

Also remember, ELSS, being a tax saver fund has 3 years of lock-in period. i.e., it will give you very low liquidity as you cannot redeem your money before 3 years.

If you are investing in ELSS through SIP, each installment can be redeemed after 3 years in the similar fashion.

Investing periodically also spreads the burden and makes a good investment habit.

An ideal practice would be to start an SIP early in the financial year and continue until March next year.

Things to Remember

Don’t just run for returns from investment for investing in mutual funds. There are a lot of factors you should look into before selecting a fund which will match your investment goals.

Following the 3 things you should always remember before investing in Mutual Funds :

  • Higher rates: don’t blindly invest in the fund with the highest returns. Invest based on the duration you want to invest for.
  • Every person’s financial condition is different. Evaluate the funds you invest in yourself – don’t invest in a fund because of its popularity.
  • Review your investment from time to time but not too often. Once a few weeks is good enough.

Read More: 10 Tips on investing in Mutual Funds

Also, one should actively consider allocating regularly to ELSS funds.

You may even choose to invest large amounts, above your tax deduction limit, but be mindful that your investment will not be accessible, and to that extent unchangeable, for the first 3 years of lock-in.

Also, keep in mind, allocation to equity is most efficient over a period of more than 5-7 years.

Happy Investing!

Disclaimer: the views expressed here are those of the author and do not reflect those of Groww.