Investment in ELSS Better than PPF, NSC: CRISIL

Recently a report from Credit Rating and Information Services of India Ltd (CRISIL) stated that investment in an Equity-linked Savings Scheme (ELSS) of a mutual fund can yield higher returns when compared to other tax-saving investment instruments like Public Provident Fund (PPF) and National Savings Certificates (NSC).

The research data showed that ELSS gave 26% and 22% annualised returns over 3 and 10 years respectively, contrast to 8-9 percent offered by best tax saving investment products such as PPF and NSC. It is significant that interest on EPF for 2011-12 was decreased to 8.25% from 9.5% and thus ELSS can act as a strong alternative to investors. Moreover debt products are considered to be relatively safe but these products unable to generate higher inflation-adjusted returns over the long-run.

Though ELSS is not a product to save tax, but it can create wealth over the long-run. With average inflation around 7% over the past 3 years, CRISIL noted that, ELSS gave an inflation adjusted return of 14% which is significantly higher than return offered by other tax saving financial products.

The credit rating agency however cautioned that, the investment in ELSS requires some amount of risk and investors must pick only those schemes which have performed consistently well. Also, the investment period should be more than 5 years for higher inflation-adjusted returns.

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