Here are the 6 most consistent ELSS funds
Tax-saving equity funds, otherwise known as Equity Linked Savings Schemes (ELSS), are very popular for many reasons. They offer a tax deduction of up to Rs. 1.5 lakh (per financial year) from total income available under Section 80C of the Income Tax Act, 1961. The three-year lock-in period enables participation in the long-term growth potential of equity markets. Since every fund-house has its ELSS, it can be challenging to pick and choose the best funds from such a large universe. Instead of going for the best performer, investors should select the most consistent ELSS funds. We looked at various periods to find out the 6 most consistent ELSS schemes. Read on.
Consistency is key
Consistency of returns is an important driver of overall investment results. A fund that does well once in a blue moon is not a reliable vehicle for your hard-earned money.
During bull markets, every equity fund does well. Should you go for the fund that has delivered the highest returns? No. It is more important to see how the funds have been able to perform over longer periods.
We looked at point-to-point returns of all the ELSS funds over the long term, i.e. 3-, 5- and 10-year periods. We have taken the regular plan as the direct plans were introduced in 2013. This helped us understand which funds among this large category consistently performed well.
The following is the list of the 6 most consistent tax-savings funds.
- Quant Tax Plan
- IDFC Tax Advantage (ELSS) Fund
- DSP Tax Saver Fund
- JM Tax Gain Fund
- Bank of India Tax Advantage Fund
- Canara Robeco Equity Tax Saver Fund
Here is a table that illustrates the returns of these 6 most consistent funds. Notice how the 6 ELSS funds selected are always in the top 10 best ELSS funds in terms of returns across all the time periods, showing their consistency.
| Fund Name | 3 Yr Ret (%) | 3 Yr Rank | 5 Yr Ret (%) | 5 Yr Rank | 10 Yr Ret (%) | 10 Yr Rank |
| Quant Tax Plan | 33.59 | 1/34 | 20.45 | 1/32 | 19.72 | 1/26 |
| IDFC Tax Advantage (ELSS) Fund | 20.82 | 3/34 | 12.66 | 5/32 | 17.48 | 2/26 |
| DSP Tax Saver Fund | 18.46 | 7/34 | 12.35 | 6/32 | 17.14 | 4/26 |
| JM Tax Gain Fund | 17.97 | 8/34 | 12.09 | 7/32 | 16.29 | 5/26 |
| Bank of India Tax Advantage Fund | 23.77 | 2/34 | 13.90 | 4/32 | 16.04 | 7/26 |
| Canara Robeco Equity Tax Saver Fund | 20.18 | 4/34 | 14.61 | 2/32 | 15.41 | 9/26 |
Returns as on 22-Jul-2022
Be it a bull market, bear market, or flattish phase, the most consistent ELSS funds such as Quant Tax Plan, IDFC Tax Advantage, DSP Tax Saver, JM Tax Gain Fund, Bank of India Tax Advantage Fund, Canara Robeco Equity Tax Saver have been able to consistently generate high returns, which is above category average and also many peers.
Let us try to understand what has led to the performance of the top 5 ELSS mutual funds.
Quant Tax Plan:
Quant Tax Plan has given returns of 20.82% since its launch in 2013. As of 30th June 2022, the fund’s total assets stood at Rs. 1,370 crores.
From the past performance, we have seen that Quant Tax Plan is the best ELSS scheme as it has topped the charts in the 3-, 5- and 10-year returns.
Let us see the return consistency of the fund by comparing the rolling returns of the fund:
| Scheme / Category Name | Less than 0% | 0 – 8% | 8 – 12% | 12 – 15% | 15 – 20% | Greater than 20% |
| Quant Tax Gr | 2.92 | 9.94 | 10.04 | 9.61 | 20.73 | 46.76 |
| Equity: ELSS | 9.22 | 24.89 | 26.06 | 14.41 | 19.07 | 6.36 |
Start Date:- 01-01-2013,Time Period:- 3 Year
This table shows that Quant Tax Plan has given returns greater than 20% over 46% of the time.
Rolling returns are the annualised returns of the mutual fund scheme chosen for a given term, i.e. three years in this case on every day, week, or month up until the end of the duration.
Quant Tax Plan employs a flexible investing strategy concerning the sector and capitalisation exposures. The fund’s portfolio has seen a fair amount of changes due to its investment philosophy of VLRT, which stands for Value, Liquidity, Risk Appetite, and Time.
According to their approach, the market-cap and sector allocations have undergone considerable modifications over time. The fund has historically allocated a sizable portion of its assets to large caps.
The high performance of the fund can be attributed to its higher allocation to mid and small-cap stocks. According to Value Research, the percentage allocation to growing companies is around 38%, higher than the category average of 29%.
Moreover, considering the sectoral allocation, we can see that the fund has a higher allocation to services and lower allocation to financials than the category.
The expense ratio of the regular plan is the highest among its peers, with 2.62%, while the expense ratio of the direct plan of the fund is lower than the average at 0.57%.
IDFC Tax Advantage (ELSS) Fund
IDFC Tax Advantage (ELSS) Fund is another top ELSS fund to invest in and save on tax. The fund was launched on 1st Jan 2013 and has generated returns of 17.47% since its launch.
The fund also has a higher allocation to small-cap stocks at 16% than the category average of 6.5%.
Let us see the return consistency of the fund in terms of the rolling returns:
| Scheme / Category Name | Less than 0% | 0 – 8% | 8 – 12% | 12 – 15% | 15 – 20% | Greater than 20% |
| IDFC Tax Advtg (ELSS) Reg Gr | 7.6 | 10.21 | 14.66 | 17.48 | 29.97 | 20.09 |
| Equity: ELSS | 9.22 | 24.89 | 26.06 | 14.41 | 19.07 | 6.36 |
The rolling returns look attractive as the fund has delivered returns above 15% for more than 50% of the time.
However, it is important to note that the high returns have come from high volatility. The fund’s beta is the highest in the category at 1.15%.
DSP Tax Saver Fund
This tax-saving mutual fund has been a consistent performer over the long term. The fund has amassed a respectable long-term performance history with exposures across market cap sectors, solid stock-level diversity, a mix of growth and value flavours, long-term holdings, and short-term opportunistic plays.
Let us see the returns consistency of this fund that ranks as one of the top 10 ELSS funds:
| Scheme / Category Name | Less than 0% | 0 – 8% | 8 – 12% | 12 – 15% | 15 – 20% | Greater than 20% |
| DSP Tax Saver Reg Gr | 3.14 | 12.46 | 13.43 | 20.37 | 27.19 | 23.4 |
| Equity: ELSS | 9.22 | 24.89 | 26.06 | 14.41 | 19.07 | 6.36 |
We can see that the fund has given returns between 15-20% almost 30% of the time.
JM Tax Gain Fund
The fund’s investment style is growth-oriented with a tilt to larger caps. Currently, the fund doesn’t have any exposure to small-cap funds.
This ELSS scheme has given returns of 15.99% since its launch in Jan 2013.
Here’s how the fund has fared regarding rolling returns against the category.
| Scheme / Category Name | Less than 0% | 0 – 8% | 8 – 12% | 12 – 15% | 15 – 20% | Greater than 20% |
| JM Tax Gain Fund Gr | 3.37 | 8.04 | 16.85 | 25.33 | 29.57 | 16.85 |
| Equity: ELSS | 9.22 | 24.89 | 26.06 | 14.41 | 19.07 | 6.36 |
The fund has been able to generate consistent returns.
However, it is essential to consider that the fund size is smaller than the other ELSS schemes, with assets of Rs.61 crores in June 2022.
Moreover, the expense ratio of the direct plan of the fund is on the higher side at 1.61%
Bank of India Tax Advantage Fund
Bank of India Tax Advantage is another top 5 ELSS fund launched on 1st Jan 2013 and has given returns of 16.77% since its inception.
The fund’s expense ratio is 1.34% and manages an AUM of Rs. 551 crores.
The fund invests in stocks with a wide and narrow moat.
If we see the rolling returns, we can see that the fund has generated negative returns of just 0.11% since its inception in a three-year rolling period.
| Scheme / Category Name | Less than 0% | 0 – 8% | 8 – 12% | 12 – 15% | 15 – 20% | Greater than 20% |
| BANK OF INDIA Tax Advtg Reg Gr | 0.11 | 15.96 | 16.18 | 28.99 | 23.78 | 14.98 |
| Equity: ELSS | 9.22 | 24.89 | 26.06 | 14.41 | 19.07 | 6.36 |
Canara Robeco Equity Tax Saver Fund
Canara Robeco Equity Tax Saver Fund is another best ELSS fund. The fund launched on 2nd Jan 2013 and manages assets worth Rs. 3,518 crores as on 30th June 2022.
This fund invests around 75% in large cap stocks and the rest in midcap stocks. The fund is well diversified and invests in a mix of cyclical, sensitive and defensive stocks. It also invests in companies with a higher competitive advantage than the category average.
Around 28% of the time, the fund has given returns in the 8-12% range. However, if we see the lower end of the returns range, the fund’s negative returns are pretty on the lower side.
| Scheme / Category Name | Less than 0% | 0 – 8% | 8 – 12% | 12 – 15% | 15 – 20% | Greater than 20% |
| Canara Robeco Equity TaxSaver Reg Gr | 0.22 | 10.88 | 28.4 | 22.42 | 26.55 | 11.53 |
| Equity: ELSS | 9.22 | 24.89 | 26.06 | 14.41 | 19.07 | 6.36 |
Conclusion:
These were six of the top 10 ELSS Funds that have delivered consistent returns over the long run.
Do note that some popular ELSS funds like Axis Long Term Equity, Invesco India Tax Plan, BNP Paribas Long Term Equity, ICICI Pru Long Term Equity and HDFC Long Term Advantage do not figure in the most consistent list. The reasons for omission are likely to be the lack of the desired level of consistency in performance.
It is important to understand that past performance does not impact future performance. Please seek professional help before investing in mutual funds.
