ELSS. The full name is Equity Linked Savings Scheme. Such schemes are considered exceptional in terms of tax savings. Samco Mutual Fund’s latest product also belongs to this category.

ELSS (Equity Linked Savings Scheme) is quite unique when it comes to tax saving. Many investors trust the combined strength of the short lock-in (three years) and the ability to deliver capital appreciation. Samco Mutual Fund’s latest product also belongs to this category. Shri Paras Natalia, Head of Equity Researchers, Samco Asset Management Company answered the question of ‘Sancho’.

Where can ELSS fit in a typical investor’s portfolio?
As you know, ELSS is one of the best ways to save tax. While the lock-in for other tax savings schemes is much higher, there is only a three-year lock-in. Many invest in equity schemes and think of exiting too early. Their returns are likely to be low. If you look at the overall data of the fund industry, you will understand that many investors redeem very early. The number of investors who have exited in just two years is not small. Here, in the case of a tax saving scheme, the investment must be held for three years. So it is possible to get more returns. Of course, a lot depends on how the fund manager invests, and in what strategy. For example, let’s talk about our own tax saving fund. We have decided to invest mainly in mid-cap and small-cap. Yes, there may be more uncertainty but at the same time, you will get higher returns.

Can the common investor compare tax savings funds with other equity funds?
Look at ELSS in terms of the lock-in period. It is best not to compare with other common equity funds. That is, this lock-in makes the difference, and that is why ELSS is a very unique product. This category of funds, I think, can be considered ideal for tax planning. This opportunity is not available using other equity-based investments.

Which sectors will SAMCO ELSS focus on?
We will focus on various industries so that the portfolio of this fund is properly diversified. Although mid-cap and small-cap, our selected companies will be leaders in their respective fields. And will enjoy leadership positions in the respective markets in all those areas. At the moment, our ‘overweight’ list includes the Chemicals, Infotech, Pharma, and Consumption sectors. Meanwhile, Public Sector Undertakings, Infrastructure, and Real Estate are on the ‘underweight’ list.