Best Tax Saving Mutual Funds: JM ELSS vs SBI Long Term Equity Fund

In this uncertain times, Equity Linked Savings Schemes (ELSS) prove to be an attractive option. Not only do these tax-saving mutual funds offer good deductions under Section 80C of the Income Tax Act, but they also provide investors with a judicious means of investing in the equity markets without committing huge amounts at one go.

In the face of continued market volatility, investment in ELSS can provide a strategic point of entry in equities and take advantage of recoveries in the market in the long run. The three-year lock-in period of ELSS funds not only instils discipline in investing but also ensures investors remain invested when markets are volatile, setting them up for potential gains from market recoveries.

The Union Budget 2025-26 laid out a dramatic shift in India's tax regime, lowering the tax rates and abolishing a number of exemptions and deductions. This has made taxpayers uncertain about their best tax-saving options, particularly when ELSS fund investments under Section 80C no longer attract deductions for those who choose the new regime.

[Read: 4 Best Tax Saving Mutual Funds for 2025 - Top ELSS Funds in India]

In spite of that, ELSS funds continue to be an interesting investment proposition thanks to the presence of a mere three-year lock-in and long-term return prospects - offering one a smart alternative in a boom-and-bust market.

Even if you opt for the new tax regime presently, investing in ELSS provides flexibility since subsequent changes to the old regime can revive its tax-saving advantage. With market volatilities being driven by geopolitical tensions and inflation fears, ELSS funds can be a judicious entry into equities with growth potential. Choosing the right ELSS fund is essential to riding out these volatile times and achieving your financial goals.

[Read: How to Select the Best Suitable Tax-saving Option for You]

In this article, we are emphasizing two of the top-performing ELSS funds, handpicked to assist you in making the right choice in the backdrop of prevailing market volatilities.

# - SBI Long Term Equity Fund

SBI Long Term Equity Fund, an open-ended equity scheme is a well-established tax-saving option launched in March 1993, it holds an AUM of Rs 25,723.50 crore as of February 28, 2025. It aims to generate long-term capital growth through a diversified portfolio of equity and equity-related securities across all market capitalizations, employing a flexible investment approach that spans large-cap, mid-cap, and small-cap companies.

SBI Long Term Equity Fund adopts a more balanced investment approach, emphasizing stability by investing in established companies, reducing risk while still participating in growth opportunities through selective mid-cap and small-cap exposure. This makes it ideal for conservative investors seeking steady returns with relatively lower volatility in uncertain market conditions.

# - JM ELSS Tax Saver Fund

JM ELSS Tax Saver Fund, a tax-saving scheme from JM Mutual Fund was launched in March 2008. It adopts a balanced approach, diversifying across sectors and market capitalizations to reduce concentration risks and enhance resilience during market fluctuations. With a mandatory 3-year lock-in period, the fund is well-suited for long-term investors.

JM ELSS Tax Saver Fund follows an aggressive investment style aiming to capture growth opportunities in emerging companies. This approach may deliver high returns but comes with increased volatility. The fund's focus on small-cap exposure positions it well for market upswings but may experience sharper fluctuations during downturns.

• Performance Comparison: Scheme Returns

  Scheme Name	Absolute (%)	CAGR (%)
  	1 Year	3 Years	5 Years	7 Years
  SBI Long Term Equity Fund	46.54	26.65	25.04	17.83
  JM ELSS Tax Saver Fund	41.87	22.03	22.94	18.12
  ELSS - Category Average	31.72	18.68	20.48	15.49
  Benchmark - Nifty 500 TRI	30.34	17.29	19.26	15.10

  Data as of March 12, 2025
  Do note past performance is not an indicator of future returns
  The securities quoted are for illustration only and are not recommendatory.
  (Source: ACE MF, data collated by PersonalFN Research)  

  Both the SBI Long Term Equity Fund and JM ELSS Tax Saver Fund have showcased impressive market performance, consistently surpassing the ELSS category average and their benchmark index, Nifty 500 TRI, across multiple time horizons.

  SBI Long Term Equity Fund has fared well, maintaining a robust 26.65% CAGR over the past 3 years. Its 5-year CAGR of 25.04% and 7-year CAGR of 17.83% reflect its consistent ability to outperform during various market phases.

  On the other hand, JM ELSS Tax Saver Fund has also delivered strong returns, with a 3-year CAGR of 22.03%. While this is lower than SBI Long Term Equity Fund, it still exceeds the ELSS category average and benchmark. Interestingly, its 7-year CAGR of 18.12% marginally outpaces SBI's long-term performance, indicating its steady compounding potential over extended periods.

• Portfolio Composition: Asset Allocation of Schemes

  Scheme Name	Large Cap %	Mid Cap %	Small Cap %
  SBI Long Term Equity Fund	58.86	18.75	9.24
  JM ELSS Tax Saver Fund	54.82	8.55	29.78

  Data as of February 28, 2025
  Do note past performance is not an indicator of future returns
  The securities quoted are for illustration only and are not recommendatory.
  (Source: ACE MF, data collated by PersonalFN Research)  

  SBI Long Term Equity Fund maintains a higher allocation to large-cap stocks at 58.86%, providing relative stability with exposure to established blue-chip companies. It also balances growth opportunities with 18.75% in mid-cap stocks and a modest 9.24% allocation to small-cap stocks, making it a blend of stability and growth.

  On the other hand, JM ELSS Tax Saver Fund takes a more aggressive stance with a significant 29.78% allocation to small-cap stocks, which may deliver higher returns but comes with increased volatility. While its large-cap exposure is slightly lower at 54.82%, the fund's notably smaller mid-cap allocation of 8.55% makes it more skewed toward high-risk, high-reward opportunities.

  Investors seeking stability may lean toward SBI Long Term Equity Fund, while those comfortable with higher risk for potentially superior returns may find JM ELSS Tax Saver Fund more appealing.

• Market volatility: Risk Profile of Schemes

  Risk Ratio	SBI Long Term Equity Fund	JM ELSS Tax Saver Fund
  Standard Deviation (3 Year)	14.25	16.00
  Sharpe	0.35	0.22
  Sortino	0.76	0.43

  Data as of February 28, 2025
  Do note past performance is not an indicator of future returns
  The securities quoted are for illustration only and are not recommendatory.
  (Source: ACE MF, data collated by PersonalFN Research)  

  When comparing the risk-reward profile, SBI Long Term Equity Fund has a lower standard deviation (14.25), indicating reduced volatility compared to JM ELSS Tax Saver Fund's higher standard deviation of 16.00. This suggests that JM ELSS Tax Saver Fund may experience sharper fluctuations in its returns.

  Moreover, SBI Long Term Equity Fund scores higher on both the Sharpe ratio (0.35) and Sortino ratio (0.76) compared to JM ELSS Tax Saver Fund's Sharpe ratio of 0.22 and Sortino ratio of 0.43. These metrics reflect that SBI Long Term Equity Fund offers superior risk-adjusted returns and better downside protection, making it a more balanced choice for investors seeking stability alongside growth.

• Top Holdings of the Schemes:

  SBI Long Term Equity Fund		JM ELSS Tax Saver Fund
  Company	% Assets	Company	% Assets
  HDFC Bank Ltd.	8.01	ICICI Bank Ltd.	5.61
  Reliance Industries Ltd.	3.77	HDFC Bank Ltd.	5.60
  ICICI Bank Ltd.	3.47	Infosys Ltd.	4.63
  Bharti Airtel Ltd.	3.40	Bajaj Finserv Ltd.	3.97
  Hexaware Technologies Ltd.	3.39	Maruti Suzuki India Ltd.	3.36
  Tata Steel Ltd.	2.77	Bajaj Auto Ltd.	3.09
  Torrent Power Ltd.	2.75	State Bank Of India	3.00
  Axis Bank Ltd.	2.56	Bharti Airtel Ltd.	2.88
  Mahindra & Mahindra Ltd.	2.53	Larsen & Toubro Ltd.	2.73
  State Bank Of India	2.50	CreditAccess Grameen Ltd.	2.39

  Data as of February 28, 2025
  Do note past performance is not an indicator of future returns
  The securities quoted are for illustration only and are not recommendatory.
  (Source: ACE MF, data collated by PersonalFN Research)  

  The SBI Long Term Equity Fund has a strong focus on large-cap stocks, with top holdings like HDFC Bank (8.01%), Reliance Industries (3.77%), and ICICI Bank (3.47%) forming a substantial part of its portfolio. The fund's diversified exposure includes key sectors such as banking, telecom, and manufacturing, offering stability amidst market volatility.

  On the other hand, the JM ELSS Tax Saver Fund has a more balanced approach with a notable presence in mid and small-cap stocks. Its top holdings include ICICI Bank (5.61%), HDFC Bank (5.60%), and Infosys (4.63%), along with key players in auto and consumer finance sectors like Bajaj Finserv and Maruti Suzuki. This diverse mix positions the fund to capitalize on growth opportunities across multiple segments of the market.

• Expense Ratio of the Schemes

  Scheme Name	Direct Plan Expense Ratio	Regular Plan Expense Ratio
  SBI Long Term Equity Fund	0.95%	1.60%
  JM ELSS Tax Saver Fund	1.27%	2.39%

  Data as of February 28, 2025
  Do note past performance is not an indicator of future returns
  The securities quoted are for illustration only and are not recommendatory.
  (Source: ACE MF, data collated by PersonalFN Research)  

  While the difference between the two funds' expense ratios is significant under both the plans. SBI Long Term Equity Fund offers a lower expense ratio as compared to JM ELSS Tax Saver Fund and attracts investors, being a cost-effective option for investors.

  Remember, a lower expense ratio translates to potentially higher returns over time, but a lower Expense Ratio should not be the only factor to be considered while investing in ELSS.

• Suitability of Investors to the Schemes:

  SBI Long Term Equity Fund is suitable for investors seeking a relatively stable investment approach with a focus on established businesses. This fund may appeal to conservative investors aiming for steady growth while benefiting from tax savings under Section 80C. Its diversified portfolio with a balance of growth-oriented and stable companies makes it a solid choice for long-term wealth creation.

  On the other hand, the JM ELSS Tax Saver Fund is better suited for aggressive investors willing to embrace higher risk for potentially greater returns. This fund's strategy leans toward capturing growth opportunities in dynamic sectors, making it ideal for those with a higher risk appetite and a longer investment horizon. For investors seeking to capitalize on emerging trends while enjoying tax benefits, this fund offers an attractive option.

Note:  In my previous ELSS/tax-saving mutual fund comparison reports, I have covered a comprehensive analysis of the Best ELSS Mutual Funds; you may consider reading -

Best ELSS Mutual Funds: HDFC vs. Motilal Oswal for Tax Savings in 2025

Pick the Best Tax Saving Mutual Funds: BOI vs JM ELSS Tax Saver Fund

Parag Parikh ELSS Tax Saver Fund vs Kotak ELSS Tax Saver Fund: Pick Your Tax-Saving Option

Best ELSS Mutual Funds: DSP ELSS Tax Saver Fund vs Nippon India ELSS Tax Saver Fund

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MITALI DHOKE is a Research Analyst at PersonalFN. She is an MBA (Finance) and a post-graduate in commerce (M. Com). She focuses primarily on covering articles around mutual funds including NFOs, financial planning and fixed-income products. Mitali holds an overall experience of 4 years in the financial services industry.
She also actively contributes towards content creation for PersonalFN’s social media platforms in the endeavour to educate investors and enhance their financial knowledge.
 

Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing.
This article is for information purposes only and is not meant to influence your investment decisions. It should not be treated as a mutual fund recommendation or advice to make an investment decision in the above-mentioned schemes.