How ELSS compares with PPF and Nifty 50
We built different scenarios taking into account investments over a 20-year period in the PPF, ELSS and Nifty 50 to check which one is most rewarding
Dec 20, 2018
How to get sustained high returns is one of the most frequent asked question from the field of finance. The answer is simple; invest systematically and over time, the impact of compounding will help in generating returns. This easy to follow approach is applicable to every type of investor; the low risk taker to those who can take more risk. The outcome for both will be the same; the difference being a low risk taker will take longer time to build a large kitty over the one who is a willing risk taker.
To illustrate this method, we built different scenarios taking into account investments in three different instruments: the PPF, the average of ELSSs over a 20-year history, and the Nifty Total Return Index.
In each instance we took Rs 1.5 lakh as annual investment made on April 1 every year. Rs 1.5 lakh is the upper limit of what one needs to deploy each year to claim deduction under Section 80C to save on income tax. We took the actual data over the past 20 years of each these instruments to demonstrate wealth creation.
The study revealed that the corpus of Rs 30 lakh invested over a period of 20 years, grew to Rs 2.28 crore, highest, in case of ELSS. PPF gave the lowest returns and the corpus could grow only to Rs 77.82 lakh. On the other hand, according to the Nifty Total Return Index, the corpus grew to Rs 1.55 crore