​How to monitor and review your ELSS mutual fund investments?

When you begin your investment journey, you often are confused about the investment avenues that may work best for you. One such financial instrument may be ELSS (equity-linked savings scheme), as this instrument is highly common among investors owing to their dual features – generate high returns and save taxes. It is a well-diversified equity mutual fund that not just assists you in attaining your long-term life goals like corpus creation for post-retirement life, child’s higher education and marriage, etc., but also allows you to avail tax benefits as per Section 80C of up to Rs 1.50 lakh.

However, note that this instrument comes with a mandatory lock-in of three years, meaning you cannot liquidate your investments during this timeframe. Thus, it is crucial for you to select the correct scheme that best matches your needs and preference. Remember, your work does not end here with the selection of an appropriate ELSS scheme. In fact, your work starts from here. Once you begin investing, you must ensure to periodically review your ELSS mutual fund investment to understand if you are on the right track. Here are some factors you must consider when monitoring your ELSS mutual fund investments.

  • Non-performance

By reviewing your investment portfolio, you can figure out which assets are underperforming or non-performing. So, you must recalibrate your ELSS investment based on this assessment and add in or liquidate based on the time frame for which the fund has been underperforming. If the fund has been underperforming for over 3 years, then you must consider redeeming it to invest in a better-performing fund. However, if the time frame is below this, then you must consider waiting as equity investment over the short run tend to be highly volatile.

  • Benchmark index

You must compare your ELSS returns against the market benchmark index. Note that a benchmark index consists of top-performing stocks, and you can review the performance of funds with similar objectives by comparing through the performance fact sheet.

  • Peer performance comparison

Striking a comparison among the peer funds acts as a yardstick to determine your portfolio’s effectiveness. So, you may compare the ELSS scheme that you have selected with its peers.

  • Risk-adjusted returns

This is a measure that permits you to choose a low-risk ELSS mutual fund scheme. Risk-adjusted return computes the fund risk against its peer funds and benchmark indices. If your ELSS fund shows the lowest risk ratio, then it means it has the highest potential to generate risk-adjusted returns.

  • Fund manager’s performance

They are the ones responsible for managing your ELSS investment actively. The fund’s performance majorly depends on the fund’s manager’s decision-making. So, ensure to keep a check on the fund manager’s decision and in case it is not according to your objectives or goals, you may redeem to invest in the scheme providing the objectives as per your requirement.

How often must you monitor the performance of your ELSS fund?

There is no set rule as to how often you must monitor the performance of your ELSS fund. However, you must ensure to review the performance of the fund at least once a year. Always, ensure to factor in the above-mentioned points while reviewing the performance of your ELSS fund scheme. Doing so would allow you to make an informed decision.

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