As with any fund investment, when narrowing down on an equity linked savings scheme, or ELSS, an error investors are prone to make is opting for the most recent chart topper. Despite the bold disclaimers about past performance not necessarily being sustained in the future, investors have a hard time resisting that lure. And when that is employed as a sole parameter, it’s not uncommon for disillusionment to set in rapidly.
Let’s say in 2008 investors rushed to invest in Taurus Tax Shield. The reason being the fund was the best performer in its category in 2007 with a return of 112%, way ahead of the average 57%. Had investors done their homework, they would have noticed the fund’s abysmal performance in 2006. And, unfortunately, the fund has not put up an impressive performance since.
Or take Principal Tax Savings. It was the best fund in its category in 2012. But a smart investor would have checked past performance to realise that it underperformed the category average over the prior four calendar years.
When looking at performance, don’t get swayed by a sporadic burst in numbers.
The tax advantage of ELSS
Do you want a mid- or large-cap tax-saving fund?
Invest in ELSS with a long-term perspective