ELSS: Selecting tax saver fund based on recent performance is risky

Choose one whose rolling returns have surpassed the benchmark a high percentage of times over a long span

The tax saving season is on currently. Many investors may want to invest in an equity-linked saving scheme (ELSS, also called tax saver fund), given the high returns they have yielded in the recent past. But with 

42 funds (with assets under manage­ment slightly above Rs 2 trillion), choosing the right fund is not easy.   

Higher returns, shorter lock-in

Tax-saving products eligible for deduction under Section 80C have a lock-in of at least five years and are fixed-income oriented. ELSS score on both counts. “One, their lock-in period of three years is shorter. And two, since the underlying investment