Tuesday, 12 July 2016

Top 3 ELSS or Tax Saving Mutual Fund to Invest in 2016

ELSS is the best tax saving investment which offers dual advantage of tax savings as well as wealth creation in long term. But, Every ELSS is may not be the best for you. Neither, the best ELSS of 2015 may not necessarily remain best ELSS in 2016. The market conditions,change in Fund Manager, Mutual Fund Size etc, Hence you need a review to your ELSS SIP. In this post, I will handpicked the best 3 ELSS to invest in 2016 via SIP for long term wealth creation.

If you search google for "best tax saving mutual funds in india" you will find different bloggers and website providing you a list of top 10 ELSS scheme or Top 10 tax savings mutual funds but this confuses you even more because every other websites recommends one or the other different schemes and you are not in a position to take decision in which mutual fund scheme to invest


I have specifically handpicked 3 best ELSS schemes to invest and i am also invested in Reliance Tax Saver & Franklin India Tax Shield with a monthly SIP of Rs 2500 each. I believe "Charity begins from home" and as you have landed on this page it is my responsibility to provide you with as much as accurate information so that your money grows

Must Read : Why Real Estate is and was a Dull Investment

Lets explore the top 3 Tax Savings Funds in India and I have not selected Axis Long Term Equity Fund the only reason being fund has almost reached AUM of Rs 9291 Cr, the bigger the size of fund scheme bigger the problem of fund manager. Here is a post where in i have mentioned how large AUM impact the fund returns click here to read the post

Funds selected are on basis of
  • Alpha Ratio 
  • Risk - Reward Ratio
  • Rolling Returns calculation for 3 years
  • Out-performance in SIP Returns for 5 Years
  • Out-performance in Lump Sum returns compared to benchmark for 5 years
  • Funds in existence from 2008 which has seen the bear phase of global recession and bull phase later 
  • Funds AUM below 5000 Cr 
  • Funds provided returns more than 15% CAGR
Must Read : Best 3 Equity MF to Invest in 2016 via SIP

# 1 : Reliance Tax Saver Fund

The Fund has consistently outperformed its benchmark (S&P BSE 100) and the ELSS category across various times. The fund marginally under-performed the benchmark and the category during the bull phase of 2003 to 2007. It did picked up pace in December 2007 and thereafter consistently outperformed both the benchmark and the category across all market phases.
Reliance Tax Saver 5 Years SIP Returns



1 Year Rolling Returns for 3 Year Period

Performance : Lumpsum Rs 1,000 invested in the fund on 08/07/2011 would have grown to around Rs  21771 (XIRR return of 16.82 per cent) as on July 8th 2016. A similar investment in the benchmark would have grown to Rs 14881 (8.27 per cent).

A monthly systematic investment plan (SIP) of Rs 1,000 for a period of five years from 08/07/2011 to 08/07/2016 (on a principal of Rs 60,000) would grow to around Rs 101913, delivering an CAGR return of 16.9% per cent where as the same SIP in benchmark fund would grow to 78992 with a CAGR of 8.4% 


Must Read : Best 3 Mid Cap Fund Churning Money for Investors 

# 2 : Franklin India Tax Shield Fund 

Franklin India Tax Shield manages an AUM of 2146 Cr as on  30/05/2016. Fund is highly invested in Banks and Financial Services Stocks,Automobiles and technology. It should be a top choice for risk averse investors seeking ELSS benefits. 


Franklin India Tax Shield 5 Year SIP returns
1 Year Rolling Returns for 3 Year Period
Performance : Lumpsum Rs 1,000 invested in the fund on 07/08/2011 would have grown to around Rs  2073 (XIRR 15.67%) as on July 8th 2016. A similar investment in the benchmark NIFTY 500 would have grown to Rs 1528 with a modest XIRR of 8.83%

A monthly systematic investment plan (SIP) of Rs 1,000 for a period of five years from 07/08/2011 to 07/07/2016 (on a principal of Rs 60,000) would grow to around Rs 97845, delivering an XIRR return of 19.6% per cent where as the same SIP in benchmark fund would grow to 82443 with a XIRR of 12.5%

It is from the above data we can clearly identify the fact that Franklin Tax Sheild fund has clearly outperformed benchmark NIFTY 500 in Lumpsum as well as SIP returns.


Must Read : Why You Should Never Buy ULIP ?

# 3 : Birla Sun Life Tax Saver Plan  

After a bad patch from 2008-2010,Birla Sun Life Tax Plan has made a big comeback in the last five years, with a good run since 2014. If you check the rolling returns graph below, after 2014 fund has outperformed benchmark index S&P BSE Sensex. The fund's overweight positions in engineering and capital-goods majors has paid off in the first part of 2015. So did its underweight positions in financial services and energy.
Birla Sun Life Tax Saver 5 Years Sip Returns
Birla Sun Life 1 Year Rolling Returns for 3 year period
Performance : Lumpsum Rs 1,000 invested in the fund on 07/08/2011 would have grown to around Rs  2170 (XIRR 17.06%) as on July 8th 2016. A similar investment in the benchmark Sensex would have grown to Rs 1602 with a XIRR of 10.06%

A monthly systematic investment plan (SIP) of Rs 1,000 for a period of five years from 07/08/2011 to 07/07/2016 (on a principal of Rs 60,000) would grow to around Rs 99318 with a XIRR returns of 20.2% and SIP of Rs 1000 for same period in benchmark BSE SENSEX would have grown to 76670 with a CAGR of 9.6%

If you would like a fund which has proved itself across not one but multiple market cycles, this one fits the bill.


Points to remember while investing in ELSS
  • Money invested in ELSS are directly related to stock market, risk is involved.
  • Subsequent investment is also locked for 3 years. For Example you invested via SIP on 01/06/2016 & 01/07/2016 then on 01/06/2019 your units purchased on 01/06/2016 will be available for redemption
  • And lastly, you should consider that you can’t reduce the impact of market fall, as you can’t switch or redeem investment before 3 years
Must Read : Why Liquid Funds are better alternative to Savings Bank A/C

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Who doesn't like a financial healthy life,In case if you want one contact me for Financial Planning, please do drop an email to me at vipuls1979@gmail.com. I would be happy to assist you

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Disclaimer  :-

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