Looking to save on taxes while building wealth at the same time? That’s where ELSS funds come in–offering the best of both worlds. But with so many options out there, which one should you choose?
Today, we’re diving into a showdown between two popular tax-saving funds: the Quant ELSS Tax Saver Fund and the Motilal Oswal Tax Saver Fund.
Both the funds aim to boost your returns and lighten the tax burden, but they differ in strategy, risks, and performance.
Curious to see which fund aligns with your goals?
But before we dive headfirst into the comparison of the two funds, let’s first have a recap on what the ELSS funds are and how they function. Let’s dive right in!
What are ELSS Funds?
An Equity Linked Savings Scheme (ELSS) is a type of Mutual Fund in India that gives investors a chance to grow their wealth by investing primarily in stocks, while also offering a tax-saving benefit. It’s a win-win situation for those looking to tap into the potential of the equity market and reduce their tax burden. These funds have been active in India since the year 1993.
With ELSS, you get exposure to a diversified portfolio of stocks, and because of its long term focus, it’s designed to help you ride out market ups and downs, making it a popular choice for long term wealth creation.
Functions and Perks
Tax Saving: Invest and save up to Rs. 1.5 lakh under Section 80C of the Income Tax Act.
Lock-In Period: Investments stay locked for a period of 3 years, offering one of the shortest lock-in periods among tax-saving options.
Potential for Higher Returns: As these funds are equity focused, they have the potential to outperform traditional tax-saving instruments.
Diversified Risk: ELSS Mutual Funds spread investments across different sectors and market caps, helping manage the risk.
No Upper Limit on Investment: Invest as much as you like, though tax benefits cap at Rs. 1.5 lakh.
Quant ELSS Tax Saver Fund
The Quant ELSS Tax Saver Fund is an open-ended fund, crafted to help you build your wealth while also giving you a chance to save on taxes. This fund focuses on investing in a variety of equity shares with a strong growth potential, aiming to make your money work harder for you.
Its unique ability to adjust to market changes allows it to maintain a well-rounded approach across different sectors. If you’re seeking a long-term investment that balances capital growth with saving opportunities, this fund could be a great choice for you.
Here are some details of the fund for your review:
| Quant ELSS Tax Saver Fund | |
| Attribute | Details |
| Fund House | Quant Mutual Fund |
| Date of Inception | 01-Apr-2000 |
| Riskometer | Very High |
| Category | Equity-ELSS |
| AUM(As on 30-Sep-2024) | ₹ 11,561 cr |
| Benchmark Index | NIFTY 500 TRI |
| Fund Manager | Ankit PandeVasav Sahgal |
| Expense Ratio(As on 30-Sep-2024) | 1.71% |
| Exit Load | Nil |
| Minimum SIP Investment | ₹500 |
| Minimum Lumpsum Investment | ₹500 |
| Minimum Additional Investment | ₹500 |
Data updated as of 16.10.24
Motilal Oswal ELSS Tax Saver Fund
The Motilal Oswal ELSS Tax Saver Fund is designed for those looking to save on taxes while aiming for solid long-term growth. This fund focuses on a carefully chosen mix of equity and related investments, targeting stocks that show strong potential for appreciation.
Its unique feature is a concentrated portfolio, which allows for a more in-depth analysis and connection with a select group of high quality companies. This approach can lead to better performance in positive market environments.
With a mandatory lock-in period of 3-years, the fund encourages a disciplined investment strategy, enabling you to build wealth while effectively addressing your tax-saving objectives.
Here are some details of the Mutual Fund for your review:
| Motilal Oswal ELSS Tax Saver Fund | |
| Attribute | Details |
| Asset Management Company(AMC) | Motilal Oswal Mutual Fund |
| Date of Inception | 21-Jan-2015 |
| Riskometer | Very High |
| Category | Equity-ELSS |
| AUM(As on 30-Sep-2024) | ₹4,195 Cr |
| Benchmark Index | NIFTY 500 TRI |
| Fund Manager | Rakesh ShettyAjay KhandelwalSantosh SinghAtul Mehra |
| Expense Ratio(As on 30-Sep-2024) | 1.83% |
| Exit Load | Nil |
| Minimum SIP Investment | ₹500 |
| Minimum Lumpsum Investment | ₹500 |
| Minimum Additional Investment | ₹500 |
Data updated as of 16.10.24
Portfolio Allocation of Funds
The Quant ELSS Tax Saver Fund and the Motilal Oswal ELSS Tax Saver Fund have a unique way of segregating percentages of allocation of their respective corpuses, hinting approaches to safeguard your investments in unique ways.
The Quant ELSS Tax Saver Fund exhibits a robust allocation strategy, with 91.67% of its assets dedicated to equity and the remaining 8.33% held in cash equivalents. The fund’s equity distribution is primarily focused on large-cap stocks, which make up 93.99% of the portfolio, while mid-cap and small-cap allocations stand at 5.48% and 0.53%, respectively.
The top companies this fund invests in are: Reliance Industries (9.59%), Samvardhana Motherson (9.17%), Adani Power (7.99%), JIO Financial (7.9%) and Life Insurance (5.98%).
This allocation underscores the fund’s focus on high-potential sectors while maintaining a keen focus on large-cap equities.
The Motilal Oswal ELSS Tax Saver Fund focuses heavily on equities, with an impressive 99.2% of its assets allocated to this segment. It also includes a small portion of 0.6% in debt securities and 0.21% in cash equivalents. The equity allocation breakdown is as follows:
- Large Cap: 49.49%
- Mid Cap: 47.61%
- Small Cap: 2.9%
Key investments in the fund feature Down Trent (7.68%), Zomato (7.67%), Kalyan Jewellars (5.74%), Prestige Estates (4.64%) and Suzlon Energy (4.59%). This strategy highlights the fund’s aim to seize growth opportunities through a concentrated equity portfolio while keeping debt and cash allocations minimal.
Risk Profile
While we compare two funds to find the right choice of investment, it becomes imperative to look over risk profiles too. We’ve fed some details in the table for your better understanding.
Take a look:
| Feature | Quant ELSS Tax Saver Fund | Motilal Oswal ELSS Tax Saver Fund |
| Risk Level | Very High | Very High |
| Market Volatility | High. Frequent strategy shifts | High. Less frequent shifts |
| Concentration Risk | Moderate to High. Focused on few sectors | Moderate. More diversified. |
| Investment Strategy | Aggressive. Dynamic shifts. | Growth-oriented. Stable. |
| Economic Impact | Highly sensitive | Moderately sensitive |
| Exit Load | No exit load | No exit load |
What do we derive from this table?
As it can be observed, one approach is more aggressive, frequently shifting focus on specific sectors, while the other is more stable and diversified across various sectors.
Interesting Insight: Both strategies allow for penalty-free withdrawal, giving investors flexibility. Knowing these differences helps investors select a fund that matches their risk tolerance and goals.
Returns and Performance
Both the funds have showcased admirable performances over the years. Here’s a sneak-peak for you:
| Fund Name | 1 Year Returns | 3 Year Returns | 5 Year Returns |
| Quant ELSS Tax Saver Fund | 44.97% | 20.76% | 35.07% |
| Motilal Oswal ELSS Tax Saver Fund | 68.8% | 26.53% | 26.24% |
Taxation and Fees
When it comes to capital gains tax, both the Quant ELSS Tax Saver Fund and the Motilal Oswal Tax Saver Fund operate under similar rules.
If you hold onto your units for over a year, you can keep gains up to Rs. 1.25 lakh tax free. Any profit beyond that is taxed at 12.5%. However, if you sell your units within a year, the entire gain is taxed at a flat rate of 20%. As long as you continue to hold your investment, you won’t have to worry about paying taxes.
Regarding dividends, both funds treat your dividend income as part of your total earnings, meaning it gets taxed based on your income level. If your dividends exceed Rs. 5,000 in a financial year, a 10% tax will be deducted before you receive the payout.
In short, the tax treatment for both funds is quite alike, providing a straightforward understanding of your potential tax responsibilities.
Which Fund is Suitable for Whom?
Quant ELSS Tax Saver Fund
Investors Seeking Growth: If you’re looking to maximize capital appreciation over the long term, this fund’s aggressive strategy may suit you.
Volatility Cats: Its dynamic approach means it frequently adjusts to market changes, appealing to risk-tolerant investors.
Great for Diversification: With a focus on large-cap stocks, it’s suitable for those who want a balanced portfolio with high growth potential.
Motilal Oswal ELSS Tax Saver Fund
Perfect for Conservative Investors: If you prefer a more stable investment with less frequent shifts, this fund’s conservative approach is ideal.
Good for long-term wealth building: It targets high-quality companies for steady growth, making it ideal for those with a long-tern view.
Excellent for Tax-Saving: With a concentrated portfolio, it effectively meets tax-saving goals while aiming for solid returns.
Conclusion
In a nutshell, both the Quant ELSS Tax Saver Fund and the Motilal Oswal ELSS Tax Saver Fund are solid contenders for tax-saving investments, each with its own unique strengths.
The Quant fund takes an aggressive approach, perfect for those who are ready to ride the market’s highs and lows, while the Motilal fund leans towards a more stable strategy, ideal for long-term wealth buildiers.
So, whether you’re all about chasing high returns or prefer a safer path to savings, there’s an ELSS fund out there that suits your style.
Now, if you had to pick between saving on taxes or splurging on that dream vacation, would you rather be financially savvy or go to Bali and convince your friends it’s a ‘business trip’?
Suggested Read – Quant Small Cap Fund vs Nippon India Small Cap Fund
