Top 10 ELSS Mutual Funds for Senior Citizens to Maximize Returns and Save on Taxes
For senior citizens, as always, investment options are driven into capital protection along with the commonly regular returns in an income form, at the same time also providing tax benefits. Mutual fund investments, of course, specifically ELSS, make wealth maximization in a tax-benefitting manner under Section 80C of the Income Tax Act.
An ELSS is an equity-linked saving scheme that constitutes one of the types of equity mutual funds in India. It has a compulsorily required lock-in for a minimum period of three years during which at least 80% of the assets in the fund would be directed towards equities. The remaining proportion is towards debt instruments, making these ELSS funds rather appealing for their growth prospects and tax savings. Investors can forego Rs.1.5 lakh from their taxable income under Section 80C.
Key Features of ELSS Funds
1. Equity Investment Focus: The minimum proportion of the fund to be invested in equity or equity-related instruments shall be 80% of assets, while it can hold up to 20% in allowable debt instruments.
2. Diversification: ELSS funds are diversified across various sectors, themes and companies of different market capitalisations, thereby providing a diversified portfolio.
3. Lock-in Period: Investment in ELSS requires a three-year lock-in investment. However, an investor can choose to keep the fund beyond this period.
4. Tax Benefits: ELSS investments are eligible for tax exemptions under Section 80C. The returns from such funds are taxed as Long-Term Capital Gains.
5. Wealth Creation Potential: ELSS funds also offer a potential long-term wealth creation along with tax benefits, owing to their equity exposure.
ELSS funds have a three-year lock-in period, so the investments stay stable, allowing time to grow without getting affected by short-term market fluctuations. It is not ideal for quick gains, still the means of disciplined long-term wealth creation, and also reduces taxable income.
Liquidity, however, might be a problem when some sort of urgent requirement for liquidity is there for senior citizens. While ELSS does come with growth potential and tax benefits, there is liquidity protection. Recommendations to seniors, thus, senior citizens are to weigh these tax benefits along with potential returns against requirements for liquidity. If liquidity is of prime importance, then debt mutual funds or even schemes like Senior Citizen Savings Schemes might turn out to be more suitable. However, for liquid funds in alternative emergencies, one may consider ELSS as a part of their portfolio.
While selecting the right ELSS mutual funds, the following parameters will come into play correlated with financial objectives and market conditions:
1. Historical Performance: View how the fund performs in 3, 5 and 10-year time periods. How has it beaten the benchmark in different market scenarios? Delivering higher returns more consistently is the most important thing.
2. Expense Ratio: A low expense ratio ensures management fees do not eat into a significant portion of returns. Hence, an expense ratio becomes crucial for ELSS investments where you are locked into an investment for 3 years.
3. Skill Fund Manager: The expertise and experience of the fund manager can add value in handling fluctuating markets. A good fund manager can ensure that the portfolio is performing well across different degrees.
4. Risk-Adjusted Returns: Ratios like the Sharpe ratio or Sortino ratio are used to measure how well the fund compensates for the risk that the fund takes. A better ratio indicates that the fund is offering better risk-adjusted performance.
5. Portfolio Diversification: A well-diversified fund with sector and market capitalization exposure (large, mid, and small caps) helps in reducing risk and delivering better returns in the long run.
Best 10 ELSS Mutual Funds for Senior Citizens
Here are the best 10 ELSS mutual funds based on the above key selection criteria:
1. Motilal Oswal ELSS Tax Saver Fund
- 3 Year Return: 45.56%
- Expense ratio: 0.65%.
2. SBI Long-term Equity Fund
- 3 Year Return: 37.52%
- Expense ratio: 0.93%
3. HDFC ELSS Tax Saver Fund
- 3 Year Return: 32.13%
- Expense ratio: 1.08%
4. DSP ELSS Tax Saver Fund
- 3 Year Return: 31.94%
- Expense ratio: 0.68%
5. Bank of India ELSS Tax Saver Fund
- 3 Year Return: 31.43%
- Expense ratio: 0.96%
6. Quant ELSS Tax Saver Fund
- 3 Year Return: 30.98%
- Expense ratio: 0.65%
7. Franklin India ELSS Tax Saver Fund
- 3 Year Return: 30.79%
- Expense ratio: 0.99%
8. Baroda BNP Paribas ELSS Tax Saver Fund
- 3 Year Return: 29.96%
- Expense ratio: 0.95%
9. Invesco India ELSS Tax Saver Fund
- 3 Year Return: 29.96%
- • Expense ratio: 0.75%
10. Nippon India ELSS Tax Saver Fund
• 3 Year Return: 29.96%
• Expense ratio: 1.01%
Conclusion
ElSS mutual funds thus offer the right opportunity for senior citizens to generate optimal returns while simultaneously availing of tax savings under Section 80C. While a three-year lock-in mandates long-term investment discipline, tax exemption avenues, and the possibility of following some wealth creation path are all good reasons for investors looking to multiply their savings. A critical aspect, however, is that the performance of the fund, its expense ratio, and liquidity needs before one invests form an essential checklist to see if it meets one’s financial goals.
