Best ELSS Funds for Long-Term Investments in 2017-18: A Comprehensive Guide

Investing in tax-saving schemes is a common strategy to meet tax obligations while potentially achieving higher returns over time. Equity Linked Saving Schemes (ELSS) funds are a popular choice among investors seeking both tax benefits and growth potential. This guide will provide a detailed analysis of some of the best ELSS funds to consider for investments in the 2017-18 financial year, focusing on returns in the 3-5 year horizon.

Understanding ELSS Funds

ELSS funds are a class of mutual funds that are intended to provide tax benefits under Section 80C of the Income Tax Act of India. These funds typically have a lock-in period of 3 years, after which investors can redeem their units. The primary advantage of ELSS funds is that they offer the flexibility to invest in a range of assets, including stocks, bonds, and some other financial instruments, allowing investors to potentially earn returns higher than fixed deposits while enjoying tax benefits.

Top ELSS Funds to Consider

Based on past performance and market reviews, here are some of the top ELSS funds that investors can consider for their long-term investments in the 2017-18 financial year:

Axis Long Term Fund

The Axis Long Term Fund has been a consistent performer in the ELSS segment. This fund focuses on long-term equity exposure and has shown substantial growth over the years. Its diversified portfolio and strong historical performance make it a suitable choice for investors looking for stable returns over a 3-5 year period.

Reliance Tax Saver Fund

The Reliance Tax Saver Fund is another strong contender in the ELSS fund category. Known for its steady returns, this fund has consistently ranked among the top performers. It has a mix of equity and debt investments, providing investors with a balanced approach to growing their wealth while maintaining a solid return potential.

Birla Tax Relief 96

Birla Tax Relief 96 is a well-known ELSS fund that has demonstrated impressive returns. This fund focuses on a mix of large-cap and mid-cap stocks, offering investors a range of potential growth opportunities. While it carries a higher level of risk, it can be a good investment choice for those willing to take on more risk for higher returns.

Strategic Investment Advice

When considering an investment in ELSS funds, it is essential to adopt a strategic approach. While these funds provide tax benefits and growth opportunities, it is crucial to understand the potential market risks and hold onto your investments for the lock-in period.

As a financial advisor once noted, shifting from ELSS to other mutual funds after completing the 3-year lock-in period can provide better returns. This strategy involves reallocating your investments periodically to benefit from the growth potential of other schemes. For example, transferring a portion of your ELSS funds to tilted equity funds, debt funds, or balanced funds can enhance your overall portfolio returns.

Choosing the Best ELSS Fund

While the best ELSS funds vary based on individual investment goals and risk tolerance, one of the most recommended options for a single investment is the Aditya Birla Sun Life Tax Relief 96 Fund. This fund has consistently performed well and is known for its balance between growth and stability.

From a broader perspective, other top-performing ELSS funds that you can consider include:

Aditya Birla Sun Life Tax Plan - Direct Plan Aditya Birla Sun Life Tax Relief 96 - Direct Plan Axis Long Term Equity Fund - Direct Plan IDBI Equity Advantage Fund - Direct Plan Tata India Tax Savings Fund - Direct Plan

Of these, the Axis Long Term Equity Fund and Birla Sun Life Tax Relief 96 are especially noteworthy. The Axis Long Term Equity Fund has shown consistent growth due to its large cap focus, while the Birla Sun Life Tax Relief 96 offers a mix of mid-cap exposure, enabling it to achieve higher potential returns with a similar level of risk.

Conclusion

Selecting the right ELSS fund is crucial for achieving your long-term investment goals. While it's essential to be aware of market risks, a strategic approach to investing in ELSS funds can lead to substantial returns. Considering the advice of financial experts and diversifying your investment portfolio can further enhance your chances of success.

As with any investment, it's wise to consult a financial advisor before making your final decisions. A comprehensive financial plan that takes into account all aspects of your financial goals is essential for long-term success.