Best tax saving mutual funds or ELSS to invest in 2023 - 2024
According to Section 80C of the Income Tax Act, tax-saving mutual funds can help you save up to Rs. 1.5 lakh in taxes. Here is the monthly update on the ELSS funds we advise.
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Under Section 80C of the IT Act, Tax-Saving Mutual Funds or equity linked savings schemes (ELSSs) assist you in reducing your income tax. Every financial year, you are allowed to invest up to Rs 1.5 lakh in ELSSs and deduct your investments from taxes. Are you curious? You should familiarise yourself with ELSSs before continuing.
Stocks are purchased by Mutual Funds or ELSSs that save taxes. They run a very significant danger as a result. This is a factor that you should be aware of, especially if you are new to investing in equities Mutual Funds. ELSSs don't provide guaranteed returns as regular investments like Public Provident Fund do. A poor market can even cause you to lose money.
Therefore, why should you buy ELSSs? One is that these methods may provide better profits. These plans, as you are aware, invest in equities. Additionally, stocks typically have higher long-term returns than other investments. For instance, over a 10-year period, the ELSS category provided an average return of about 15%.
Two, among investments that save taxes, ELSSs have the shortest lock-in time. Government-backed assets make up the majority of the other 80C basket investment alternatives. They frequently have longer lock-in times. A 15-year programme like PPF, for instance, enables partial withdrawals after six years. A five-year product, the NSC. Therefore, you should invest in ELSSs if you want access to your money in three years. However, don't expect it to provide you with excellent profits in three years. Equity investment is something you should constantly keep in mind as a long-term strategy. Only if you have a five to seven-year investment horizon should you invest in equity mutual funds.
The third, and most crucial, thing to keep in mind is that ELSSs are a terrific starting point for many investors. They frequently begin with ELSSs, and the three-year lock-in period that is required in these plans enables them to withstand stock market turbulence. These investors begin investing more money in equity schemes once they begin to see the benefits, say after five or seven years.
Here are our suggested ELSSs for you to consider investing in the new year if you are interested in participating in these schemes. Notably, the list has not changed this month. Every plan on the list has kept its position. Axis Long Term Equity Fund, one of the suggested plans, has, nonetheless, spent the previous five months in the fourth quartile. The previous three months have had Invesco India Tax Plan in the fourth quartile as well. Two months earlier, it had been in the third quartile. Keep an eye out for our monthly updates to monitor the success of your schemes.
Best mutual funds to invest in for tax savings or ELSS in 2023 - 2024
- Long-Term Equity Fund Axis
- Equity Tax Saver Canara Robeco Fund
- Asset Tax Savings Fund for Mirae
- India Tax Plan Fund by Invesco
- Tax-saving DSP Fund
Here is our methodology:
ETMutualFunds has employed the following parameters for shortlisting the equity mutual fund schemes.
1. Mean rolling returns:- over the past three years, rolled every day.
2. Consistency in the last three years:- A fund's consistency is calculated using the Hurst Exponent, H. A fund's NAV series' unpredictability is measured by the H exponent. Compared to funds with low H, funds with high H often have lower volatility.
i) The return series is referred to as a geometric Brownian time series when H = 0.5. It is challenging to forecast this kind of time series.
ii) The series is referred to as mean reverting when H is lower than 0.5.
iii) The series is said to as persistent when H exceeds 0.5. The tendency of the series is stronger the greater the value of H.
3. Downside risk:- For this metric, we have solely taken into account the mutual fund scheme's negative returns.
X =Returns negative values
Y = the sum of all X's squares.
Z = Y / the number of days used to calculate the ratio
Risk reduction: Square root of Z
4. Outperformance:- Jensen's Alpha has been used to quantify it for the previous three years. Jensen's Alpha compares a mutual fund scheme's risk-adjusted return to the expected market return forecast by the Capital Asset Pricing Model (CAPM). Higher Alpha means that the performance of the portfolio has surpassed the returns forecast by the market.
The MF Scheme's average returns are calculated as follows: [Risk Free Rate + MF Scheme Beta * (Average Return of the Index - Risk Free Rate)]
5. Asset size:- The minimum asset size for equity funds is Rs. 50 crore.
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(Disclaimer: Previous success does not guarantee future success.)