Best Rated ELSS (Tax Saving) Fund By Value Research: Should You Invest in 2022?

An ELSS Fund is selected by investors for tax savings purposes by the income group, who comes under the tax slabs, as per the union government's rules. However, investors need to select good ELSS funds, because all funds perform differently in terms of returns. Value Research, a globally renowned rating firm has rated the Mirae Asset Tax Saver Fund with 5 stars, considering its security, AUM, and return trajectory in the past.

Average return in past years

The Mirae Asset Tax Saver Fund is one of the most coveted ELSS Funds, considering its assets and 3 years and 5 years returns, compared to other peer funds. The Mirae Asset Tax Saver Fund's average returns in the last 3 years is 23.60%, and the fund's average returns in the last 5 years is 22.17%. Significantly, the fund has given a huge return in the past year, compared to other peer funds. In the last 1 year, the Mirae Asset Tax Saver Fund has given 39.17% returns. Only the IDFC Tax Advantage (ELSS) Fund has given a better return during this 1 year, at 51.81%.

With the last 3 years, returns and fund assets are the 2 most important factors to consider by investors while investing in the ELSS funds.

Return calculation

Launched in December 2015, the fund has grown enormously over the years. Calculating the last 3 to 5 years is important because all the ELSS funds generally hold a lock-in period of a minimum of 3 years. But an investor can continue with them even after that period if it provides good returns.

According to Value Research, for the Mirae Asset Tax Saver Fund, an investment of Rs. 1 Lakh has grown to Rs. 1.89 Lakh, and an investment of Rs. 10,000 Monthly SIP has grown to Rs. 5.69 Lakh, in the last 3 years. The research firm also said, that an investment of Rs. 1 Lakh has grown to Rs. 2.72 Lakh, and an investment of Rs. 10,000 Monthly SIP has grown to Rs. 10.62 Lakh, in last 5 years. The minimum SIP amount for this fund is Rs. 500, per month.

Asset Allocations

Asset allocation for an ELSS fund means the total amount of assets, the fund manager is utilizing for investment in different sectors. In segments like equity, cash and cash equivalent, and debt, the funds are allocated by the fund managers. The Mirae Asset Tax Saver Fund's assets have been Rs. 10,087 crores, As on November 30, 2021.

The fund has invested 99.6% in the equity sector and the rest of 0.4% is invested in the cash and cash equivalent sector. Top 5 holding of the funds is allocated in HDFC Bank, ICICI Bank, Infosys Technology, Axis Bank, and Reliance Industries Ltd.'s stocks. - that makes the fund highly secured.

Expense Ratio (ER)

However, the fund's Expense Ratio (ER) is 1.70% as on October 31, 2021. On the other hand, another good fund - BOI AXA Tax Advantage Fund's ER is higher than this, at 2.54%. ER of the DSP Tax Saver Fund is 1.81%, and for the UTI Long Term Equity Fund, it is 2.26%.

An ER is very important for an investor to analyze because this determines how much of the fund's asset is being used for administrative and other operating expenses by the fund manager. In the stock markets, ER will be identified by "dividing a fund's operating expenses by the average dollar value of its assets under management (AUM)." A lower ER can increase your profitability to some extent.

(Also read: What is ELSS (Tax-Saving) Fund, Benefits: Should You Invest?)