Magic of compounding: ₹1 lakh investment in THIS mutual fund at launch would have swelled to ₹14 lakh in 17 years

If you are contemplating investment in a mutual fund scheme, it is normal to examine its past returns. While looking at the trend of historical returns for a year or two usually can offer some insights, it often does not give a complete picture of how the scheme has fared over a period of time. Therefore, it is advisable to assess the past returns across different time frames to see how much an investor would have earned if they had invested at the “right” time.

Here, we share the details of the DSP ELSS Tax Saver Fund, focusing on its past returns to see how the scheme has performed since its public launch in January 2007.

For those unfamiliar, an equity linked saving scheme (ELSS) is a mutual fund scheme with a lock-in period of three years, enabling investors to claim an income tax deduction of up to ₹1.5 lakh under section 80C of the Income Tax (I-T) Act.

ELSS Scheme

An ELSS is a diversified equity mutual fund scheme eligible for tax-saving investments under Sec 80C of the Income Tax Act 1961. 

Investors can claim an income tax deduction of up to ₹1.5 lakh per year. Per the Sebi’s categorisation of mutual fund schemes, these schemes invest at least 80 per cent in stocks in accordance with the Equity Linked Saving Scheme (ELSS), 2005.

(Source: dspim.com and AMFI; Returns till Sep 30, 2024)

As we can see from the above table, if someone had made an investment of ₹1 lakh in the scheme a year ago, it would have grown to ₹1.49 lakh, delivering a return of 49 per cent. 

The same investment of ₹1 lakh made three years ago would have grown to ₹1.77 lakh, offering a return of 21.04 per cent.

If someone had invested ₹1 lakh in this scheme five years ago, the investment would have grown to ₹2.93 lakh. 

Similarly, a ₹1 lakh investment in the DSP ELSS Tax Saver Fund a decade ago would have swelled to ₹5.03 lakh.

If you had invested ₹1 lakh at the time of the scheme’s launch, that investment would have delivered a return of 16.27 per cent, growing to ₹14.44 lakh.

About the scheme

The DSP ELSS Tax Saver Fund, launched on Jan 18, 2007, is currently managed by Rohit Singhania. As of Sept 30, 2024, the scheme manages assets worth ₹17,770.63 crore. 

The scheme’s benchmark index is Nifty 500 TRI, and key constituent stocks are HDFC Bank, ICICI Bank, SBI, Infosys, Axis Bank, HUL and Kotak Mahindra Bank.

It is noteworthy to mention that the past returns, while giving an indication of the scheme’s future potential, do not guarantee future returns. 

In other words, historical returns delivered by the scheme may, or may not, continue in the future.

Note: This story is for informational purposes only. Please speak to a SEBI-registered investment advisor before making any investment-related decision.