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What makes an ELSS the ideal first mutual fund?

Stock Analysis, IPO, Mutual Funds, Bonds & More

What makes an ELSS the ideal first mutual fund?

Mutual fund advisors say the category, with its mandatory lock-in period and buy and hold investment strategy, is the best first mutual funds an investor can have.

Manymutual fundadvisors sayELSSor Equity Linked Saving Schemes are ideal for investors to begin their investments in equity mutual funds. They say the category, with its mandatory lock-in period and buy and hold investment strategy, is the best first mutual funds an investor can have. Is that so? What is so special about ELSS mutual funds?

One, let us examine the mandatory lock-in period. As you know, like every tax-saving investment option available underSection 80C, ELSS or tax saving mutual funds come with a lock-in period of three years. According to mutual fund advisors, the mandatory lock-in period helps investors to get used to the volatility typically associated with equity mutual funds that invest predominantly in stocks. Since the investors do not have the exit option before the expiry of the mandatory lock-in period, they are forced to hold on to their investments and in the process they get an invaluable lesson about equity investing: you dont have to fear volatility and if you stick to your investment plan stock markets tend to reward you in the long run.

The mutual fund advisors also point out that the fund manager also benefits from the mandatory lock-in period in a way. Since he is not pressurised unduly due to short-term underperformance, the fund manager has the freedom to take long-term bets that will enhance returns over a long period. In fact, many mutual fund participants point out that positive results from ELSS often boost the confidence of first-time investors in mutual funds.

ELSS funds also serve as a stepping stone to the world of equity schemes for many investors. According to mutual fund advisors, once these investors get used to the volatility and witness their investments bounce back after a bad run in the stock market, they gain the confidence to start their investment in other equity mutual fund schemes. In fact, double-digit returns from ELSS convince many investors to take a serious look at equity mutual fund categories. With that, they learn the importance of investing in equity mutual funds to earn inflation-beating returns to create wealth over a long period.

(%)Mirae Asset Tax Saver Direct-G-5.833.542.912.5219.88Invest NowMirae Asset Tax Saver Reg-G-5.983.092.001.0618.26Invest NowMotilal Oswal Long Term Equity Fund Direct-Growth

ELSS-4.654.551.44-9.0714.94Invest NowFeatured

ELSS-4.926.624.74-0.6413.76Start SIPMotilal Oswal Focused 25 Fund Direct-Growth

Large Cap-3.845.313.94-2.8212.65Invest NowDHFL Pramerica Gilt Direct Plan – Growth

Gilt1.172.505.769.217.49Invest NowDSP Midcap Direct Plan-Growth

Mid Cap-5.085.352.41-7.7712.86Start SIPDHFL Pramerica Hybrid Debt Fund Direct Plan-Growth

Conservative Hybrid-0.592.515.017.518.90Invest NowDSP Focus Direct Plan-Growth

Multi Cap-4.795.983.30-2.779.95Start SIPMotilal Oswal Multicap 35 Fund Direct-Growth

Multi Cap-3.644.502.92-6.1913.69Invest NowMotilal Oswal Midcap 30 Fund Direct-Growth

Mid Cap-4.915.762.78-5.567.45Invest NowDHFL Pramerica Large Cap Fund Direct Plan-Growth

Large Cap-3.664.086.381.0511.59Invest NowDSP Small Cap Direct Plan-Growth

Small Cap-5.667.22-0.67-17.736.79Start SIPDSP Equity Opportunities Direct Plan-Growth

Large & MidCap-5.795.061.71-4.3613.40Start SIPDSP Credit Risk Direct Plan-Growth

Credit Risk-0.251.48-0.64-0.974.90Start SIPMotilal Oswal Long Term Equity Fund Direct-Growth

ELSS-4.654.551.44-9.0714.94Invest NowDSP Tax Saver Direct Plan-Growth

ELSS-4.926.624.74-0.6413.76Start SIPDSP Liquidity Direct-Growth

Liquid0.581.783.687.607.21Start SIPICICI Prudential Savings Fund Direct Plan -Growth

Low Duration0.532.034.278.317.87Invest NowDSP Savings Direct Plan-Growth

Money Market0.511.974.068.256.93Start SIPDSP Strategic Bond Direct Plan-Growth

Dynamic Bond-0.950.913.988.246.56Start SIPDSP 10Y G-Sec Fund Direct-Growth

Gilt with 10 year Constant Duration0.652.065.0510.047.06Start SIPDSP Bond Direct-Growth

Medium Duration0.282.093.375.667.36Start SIPDSP Short Term Direct Plan-Growth

Short Duration0.451.964.548.467.52Start SIPDSP Ultra Short Fund Direct Plan-Growth

Ultra Short Duration0.551.923.036.296.96Start SIPDSP Equity Savings Fund Direct-Growth

Equity Savings-1.624.243.451.518.31Start SIPDSP Dynamic Asset Allocation Fund Direct-Growth

Dynamic Asset Allocation0.262.754.446.959.20Start SIPDSP Regular Savings Direct Plan-Growth

Conservative Hybrid-1.123.571.73-1.626.43Start SIPDSP Equity & Bond Direct-Growth

Aggressive Hybrid-3.825.264.71-0.0211.25Start SIP

– Returns less then 1 year are absolute and above 1 year are annualised.

– Returns of 1 year are absolute and above 1 year are annualised..

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GDP growth to propel mutual fund industry: George Heber Joseph, ITI Mutual Fund

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