Invest in consistent equity-linked saving schemes funds, says expert

The start of the financial year is a good time to begin your SIP investments in ELSS

The start of the financial year is a good time to begin your SIP investments in equity-linked saving schemes (ELSS). Choose consistent performers: 

• Currently there are 42 ELSS funds
• First, we selected the top 20 funds using the three-year Sharpe ratio (a measure of risk-adjusted return)
• Then we looked at the three-year rolling return at one-month periodicity for five years  
• Using the 60 data points, we opted for the top 10 funds that had beaten their benchmarks the highest percentage of times 
• Choose consistent funds because it is easier to stick to them

Anup Maheshwari, EVP and chief investment officer–equities, DSP BlackRock Investment Management

Anup Maheshwari

“Over the long-term, returns from equities tend to be higher than from other asset classes. While ELSS is typically used to save income tax, it can be an ideal equity product, because it enforces investor discipline through a three-year lock-in. There is now rising concern about 10 per cent LTCG. However, our view is that long-term equity returns less LTCG will still be better than from other asset classes. 
 

One should choose a fund backed by an established AMC, a top-quality investment team, and having a robust investment process (which is durable), rather than going by near-term performance (which could be volatile). Consistency of performance is also a significant metric to consider, and this can be gauged better by looking at rolling returns.”