How to Review the Performance of an ELSS Fund

Without having standard benchmarks, it becomes difficult to measure the credibility of any product or service. The same applies to mutual funds. That’s because investors need to keep a tab on their mutual fund investments at regular intervals in order to check whether the fund is performing well enough to achieve a targeted goal.

Let us help you provide details about some parameters which might help you review the performance of your ELSS funds. To find out more about mutual funds and ELSS, read further:

What are mutual funds?

Mutual funds collect money from investors and invest this pool of fund in various assets across money market instruments like equity, debt, government securities, corporate bonds, etc. There are several mutual fund schemes that have unique investment objectives, and investors should pick a scheme that has the potential to get them close to their financial goal.

ELSS is one such tax saving equity scheme which holds the potential to offer investors with some gains and tax saving benefits. Here’s more on ELSS.

Equity Linked Saving Scheme

ELSS or Equity Linked Saving Scheme is an equity oriented scheme which predominantly invests in equity and equity related instruments. A minimum of 85 per cent of the total assets are invested in equity, and the rest is diversified among other assets. It is the only mutual fund tool under Section 80 C which has tax saving benefits. Section 80C, which comes under the income tax act of 1961 allows investors to claim tax benefits of up to Rs. 1.5 lakhs per annum by investing in ELSS.

ELSS comes with a three year lock in, which means investors cannot redeem their ELSS units for at least three years. Well if they do, then they might have to pay some fees for withdrawing prematurely. But investors should remember that keeping a long term goal is always beneficial in terms of investing in equities because investments held equities for the long run have usually outperformed, giving investors some decent returns.

How to review the performance of your ELSS fund?

So if you have finally decided which ELSS fund to invest in, your job is not done; in fact, it has just begun. Investing in a mutual fund scheme leaves you only half way. Post your mutual fund investment, keeping a close tab on it is equally vital. Investment enthusiasts might take a lot of advice before making a mutual fund investment decision.

Not just ELSS, mutual fund investments all  need periodic checkups as it is always a good habit for investors to have a clear and concise idea about the possible progress and alterations in their mutual fund portfolio. A document like a mutual fund’s fact sheet might enable an investor to monitor your mutual fund investments easily. It is like a report card denoting the potential growth of all your mutual fund investments.

• The current NAV or Net Asset Value your ELSS fund is usually listed on the fund’s website. Investors, if they wish, can compare the mutual fund’s benchmark index to the index chosen by the mutual fund company, for it to serve as an average for its returns.
• If you ever decide on checking the performance of a tax saving scheme like ELSS, you should be able to compare it with other funds that fall in the same (ELSS) category. It is nearly impossible to judge a mutual fund scheme solely based on its performance.
• Apart from documents like fund fact sheets of the mutual fund schemes, several websites help you track and compare the performance of ELSS funds. This way, you may keep a close tab on the performance of your scheme and at the same time track how your other mutual funds the same category are performing.
• You can compare the performance of your mutual funds over a month, every quarter, over six months or year after year.

When evaluating the performance card of your invested scheme, it is usually recommended to watch out for the factors and deviations that may affect a mutual fund’s performance.

Investing is a long term journey, and so should be the investment objective of investors seeking capital appreciation through equity investments. Your money is not going to grow overnight. It takes time for the market to move upwards. Having a bullish attitude towards your investments might be of help too. Let the money do the hard work you, give it some time to grow.

Investors, if they wish, can use the above pointers to track the performance of not just ELSS funds, but other mutual funds as well. Remember that it is not difficult to manage your own money. All you need is some persistence. Who knows, if you stay invested for the long run, you might be able to achieve your ultimate financial goal.