How much annualised return can one expect from ELSS over 10-20 years?

Is it fine to stick with just one to two ELSS for 10 to 20 years? What is the CAGR that one can expect?
- Manish

CAGR has a history now. We have a history going back up to 30 years for ELSS or tax-saving funds. If you look at these 30-year returns or if you invested and forgot about them, the ideal thing will be picking the rolling return of any of these funds with over 20-year history. The returns of these funds will range between 15-20 per cent. The return of the worst-performing fund will also be twice as much as the PPF (Public Provident Fund).

One has to understand the power of compounding. Ideally, if you pick a good fund and it remains good throughout the period, stick to it. But you have to keep an eye on any market-linked investment as you can't simply invest and forget. There are good funds that turn bad and bad funds that turn good. You can't invest in a fund for a long period, and if it turns bad, be optimistic and do nothing, hoping for it to become good.

Thus, the principle of reviewing your investment. When your funds remain bad for a lingering period, get out of them as your money is free from lock-in after three years.

This article was originally published on March 29, 2022.