End of the financial year is approaching and there is bound to be a deluge of advertisements about equity linked saving schemes of various mutual funds exhorting subscribers to save tax by investing in these schemes. With host of other options also available such as Public provident fund, National Savings Certificate, Life Insurance premium, etc. postponing the decision any more is only going to make things more complicated for you.

Schemes available in the market
Today, there are as many as 17 ELSS schemes of different mutual funds available in the market to choose from. All the big players like HDFC, SBI, ICICI, Sundaram have their own ELSS schemes catering to different classes of investors. The point to remember is that not all the schemes have same risk return matrix. In other words they have different risk and return parameters and therefore it is imperative that you do your own analysis whether you are risk averse and conservative or you can take risk in your investment profile.

Risk parameters can be judged from the point of view of investments made by the schemes in various companies. For example during the period 2000-01 before the tech meltdown, a number of aggressive ELSS has invested heavily in various technology companies, a few of which are not even worth any returns now, but were zooming during those periods. After the meltdown, many such schemes gave negative returns to the extent of 25%. While other non aggressive and conservative funds kept invested in A group and index stocks, which generated decent returns over a long term horizon. As ELSS is a long term investment decision (with a lock in period of 3 years), it is important that risk return profile of the scheme with your own is matched to avoid disappointment in future.

During present times, an analysis of the investment portfolio of funds in terms of small cap companies, mid cap companies and large cap ones can give you some idea about the risk profile of the fund. If fund is heavy into small cap and mid cap investment, it is aggressive and can give you better than the market returns. This is because a number of good small cap and mid cap companies have still not rallied to the extent large cap have done in recent past. So you can expect much better returns. However risk is also high in these stocks as in case of meltdown and in overall sentiments, these stocks are the ones which are hit the most. Needless to say that these factors should be a part of your overall decision making.