Choosing the Right ELSS: SBI Long Term Equity Fund vs Mirae Asset ELSS Tax Saver Fund

ELSS schemes offer various investment options, including lump sum investments and Systematic Investment Plans (SIPs). SIPs allow you to invest regularly in smaller amounts, inculcating financial discipline and potentially benefiting from rupee-cost averaging.

[Read: Why ELSS Is Your Best Choice to Build Wealth and Save Tax]

In 2023, the Indian stock market experienced a positive trend, with significant growth observed in key indices such as Nifty 50 and S&P BSE Sensex. This overall market uptrend contributed to the positive performance of ELSS funds. The average return for the ELSS category on a YTD basis was around 37.58%. It outperformed the S&P BSE 100 TRI (31.94%) and was at par with benchmark indices like Nifty 500 TRI (39.29%) and S&P BSE 500 TRI (38.99%).

With a multitude of ELSS available, it's important to understand that there's no single 'best' ELSS for everyone, as individual investment goals, risk tolerance, and investment horizons vary. Hence, one must consider their suitability before investing in any ELSS and make a wise choice.

Given that, the two popular contenders for ELSS funds are the SBI Long Term Equity Fund and Mirae Asset ELSS Tax Saver Fund.

[Read: Best ELSS Mutual Funds: HDFC ELSS Tax Saver Fund vs Quant ELSS Tax Saver Fund]

This article delves into a detailed comparison of two ELSS funds, SBI Long Term Equity Fund vs Mirae Asset ELSS Tax Saver Fund, aiming to equip you with the necessary insights to make an informed investment decision.

# - SBI Long Term Equity Fund

SBI Long Term Equity Fund is an open-ended equity scheme that belongs to SBI Mutual Fund. It is a well-established tax-saving mutual fund scheme launched on March 31, 1993, and currently has an AUM of Rs 20,085.15 crores (as of Jan 31, 2024).

The scheme offers capital appreciation through exposure to large, established companies with a proven track record. The fund witnessed a prolonged dull phase between 2016 and 2020, wherein it stood among the bottom quartile performers. However, the fund has shown a remarkable recovery in the last few years to stand strong among its peers.

SBI Long Term Equity Fund is benchmarked against S&P BSE 500- TRI as a primary index and S&P BSE Sensex- TRI as a secondary index. Being a tax-saving scheme, it has a mandatory lock-in period of 3 years, making it suitable for long-term investors.

# - Mirae Asset ELSS Tax Saver Fund

Mirae Asset ELSS Tax Saver Fund is an open-ended equity scheme and belongs to Mirae Asset Mutual Fund. It is a popular tax-saving scheme launched in December 2015 and currently holds an AUM of Rs 20,949. 94 crores (as of Jan 31, 2024).

Mirae Asset Mutual Fund, established in 2008, is a prominent asset management company in India. Many of their equity funds have delivered positive returns in the past year, with some performing exceptionally well. The fund house endeavours to create innovative investment solutions and cater to diverse investor needs.

Mirae Asset ELSS Tax Saver Fund is benchmarked against NIFTY 500 - TRI as a primary index and S&P BSE Sensex - TRI as a secondary index. Being a tax-saving scheme, it has a mandatory lock-in period of 3 years, making it suitable for long-term investors.

• Investment Style and Philosophy:

  - SBI Long Term Equity Fund Focuses primarily on large-cap and mid-cap stocks and has a decent allocation to small-cap stocks. The scheme aims to invest across the market cap to benefit from diversification. It also lays emphasis on sectoral themes that are expected to grow over the medium to long term.

  The SBI Long Term Equity Fund has a strong track record of delivering long-term capital appreciation. Backed by an experienced fund management team with a focus on quality, high-growth stocks across sectors, the fund has the potential to perform well in the future as well.

  - Mirae Asset ELSS Tax Saver Fund: Invests across large, mid, and small-cap stocks, offering the potential for higher returns but also carrying higher risk due to exposure to smaller companies. The fund aims to identify long-term investment opportunities in stocks of high-quality businesses available at reasonable prices and follows a buy-and-hold investment strategy until its full potential is derived.

• Performance Comparison: Rolling Returns

  Scheme Name	Absolute (%)	CAGR (%)
  	1 year	3 Years	5 Years	7 Years
  SBI Long Term Equity Fund (G)-Direct Plan	27.84	27.26	16.25	14.64
  Mirae Asset ELSS Tax Saver Fund(G)-Direct Plan	16.97	24.89	17.94	19.28
  ELSS - Category Average	37.96	18.89	18.21	14.86
  Benchmark - Nifty 500 TRI	16.13	23.26	14.26	14.71

  Data as of February 27, 2024
  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)  

  As we can see from the above table, both SBI Long Term Equity Fund and the Mirae Asset ELSS Tax Saver Fund have outperformed the Nifty 500 TRI benchmark in the 1-year timeframe. However, over longer periods (3-5 years), the Mirae Asset ELSS Tax Saver Fund demonstrates slightly better performance than the SBI ELSS fund. However, it's crucial to remember past performance is not an indicator of future results.

  SBI Long Term Equity Fund has delivered strong returns across most time frames, particularly in the last year. While it has outperformed the benchmark in most periods, it fell short of the ELSS category average in the recent 1-year timeframe. However, looking at one-year returns alone can be misleading; one may consider analysing a longer track record.

  While Mirae's absolute returns are generally lower than SBI's, it has shown consistent performance across various timeframes. Its volatility is slightly lower than SBI's, suggesting potentially smoother price movements. Notably, it has outperformed the benchmark in the 5-year timeframe, indicating strong long-term potential.

• Portfolio Composition: Asset Allocation of Schemes

  Both SBI Long Term Equity Fund and Mirae Asset ELSS Tax Saver are well-known choices for tax-saving investments, but their asset allocation strategies differ slightly.

  Scheme Name	Large Cap %	Mid Cap %	Small Cap %
  SBI Long Term Equity Fund	52.25	23.71	15.19
  Mirae Asset ELSS Tax Saver Fund	63.13	19.30	16.92

  Data as of January 31, 2024
  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 prioritises established, large-cap companies, typically exceeding Rs 100,000 crore in market capitalisation. This approach offers stability and consistency, with these companies demonstrating strong fundamentals and less volatile growth.

  Mirae Asset ELSS Tax Saver Fund allocates funds across the market capitalisation spectrum, including large, mid, and small-cap stocks. This broadens its exposure to potential growth opportunities across different market segments.

  [Read: 4 Best ELSS for 2024 - Top Performing Tax Saving Mutual Funds in India]

• Market volatility: Risk profile of Schemes

  Investing in ELSS funds offers tax benefits alongside the potential for growth, but understanding their risk-reward profiles is crucial before choosing. Remember, all equity funds including ELSS carry market risk.

  Risk Ratio (3 years)	SBI Long Term Equity Fund	Mirae Asset ELSS Tax Saver Fund
  Standard Deviation	14.38	13.81
  Sharpe Ratio	0.39	0.27
  Sortino Ratio	0.81	0.54

  Data as of February 27, 2024
  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 boasts a slightly higher SD (14.38%) compared to Mirae Asset ELSS (13.81%). An investment with high volatility is considered riskier than an investment with low volatility; the higher the Standard Deviation, the higher the risk. However, its Sharpe and Sortino ratios are also higher, suggesting that it compensates for this risk with slightly better returns.

  Mirae Asset ELSS Tax Saver Fund demonstrates lower volatility (lower standard deviation). Its lower Sharpe and Sortino ratios indicate that while it's slightly less risky, it might not generate as strong returns per unit of risk compared to the SBI ELSS fund.

  SBI Long Term Equity Fund currently holds a higher exposure to mid and small cap stocks, which are considered to be highly volatile and sensitive to price fluctuations. Mirae Asset ELSS Tax Saver Fund, though slightly less flashy in returns, presents a steadier option. The scheme leans more towards large-cap stocks, known for their relative stability as compared to SBI ELSS.

  However, bear in mind this comparison is just to give you an idea about the risk profile of both the ELSS. One must consider their risk tolerance and investment goals to determine which fund aligns better with their investment strategy.

• Top Holdings of the Schemes:

  SBI Long Term Equity Fund leans towards mid and small cap stocks, aiming for higher growth potential but accepting increased risk. Its top holdings are currently GE T&D India Ltd., ICICI Bank Ltd., Bharti Airtel Ltd., Torrent Power Ltd., and Cummins India Ltd.

  Mirae Asset ELSS Tax Saver Fund focuses on growth potential across sectors, with its top holdings currently including HDFC Bank, ICICI Bank, SBI, Reliance Industries Ltd., Kotak Mahindra Bank Ltd., etc. This scheme tilts towards large-cap stocks, seeking stability and lower volatility.

  SBI Long Term Equity Fund		Mirae Asset ELSS Tax Saver Fund
  Company	% Assets	Company	% Assets
  GE T&D India Ltd.	3.80	HDFC Bank Ltd.	8.02
  ICICI Bank Ltd.	3.80	ICICI Bank Ltd.	4.94
  Bharti Airtel Ltd.	3.24	State Bank Of India	4.50
  Torrent Power Ltd.	3.24	Reliance Industries Ltd.	4.09
  Cummins India Ltd.	3.16	Kotak Mahindra Bank Ltd.	3.77
  HDFC Bank Ltd.	3.09	Larsen & Toubro Ltd.	3.73
  Mahindra & Mahindra Ltd.	2.81	Axis Bank Ltd.	3.58
  State Bank Of India	2.79	Infosys Ltd.	3.12
  GAIL (India) Ltd.	2.77	NTPC Ltd.	2.82
  Reliance Industries Ltd.	2.75	HCL Technologies Ltd.	2.48

  Data as of January 31, 2024
  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)

• Expense Ratio of the Schemes

  When comparing ELSS funds, the Expense Ratio, which represents the annual fee charged, plays a crucial role in determining your returns. Here's a quick breakdown of Mirae Asset ELSS Tax Saver Fund vs SBI Long Term Equity Fund:

  Scheme Name	Direct Plan Expense Ratio	Regular Plan Expense Ratio
  SBI Long Term Equity Fund	0.98%	1.68%
  Mirae ELSS Tax Saver Fund	0.59%	1.58%

  Data as of January 31, 2024
  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)

  Mirae Asset ELSS offers a lower expense ratio in both direct and regular plans, indicating potentially higher net returns for investors compared to SBI Long Term Equity Fund.

  While the Expense Ratio shouldn't be the sole decision factor, it's a vital aspect to consider, especially for long-term investments like ELSS funds. Remember, a lower expense ratio translates to potentially higher returns over time.

  [Read: How to Select the Best ELSS for Tax-saving in 2024]

• Suitability of Investors to the Schemes:

  SBI Long Term Equity Fund could be suitable for investors comfortable with moderate risk and volatility in exchange for the potential for higher returns. It offers:

  - Stability and diversification through a multi-cap approach

  - Being one of the oldest and most popular schemes in the ELSS category, it offers a team of experienced fund managers

  - With consistently higher returns, it has outperformed Mirae Asset ELSS Tax Saver Fund in most timeframes.

  Mirae Asset ELSS Tax Saver Fund could be ideal for investors seeking stability and consistent returns with slightly moderate risk. The portfolio is skewed towards large cap stocks, and it offers:

  - Higher potential returns through a balanced portfolio

  - Value and growth-oriented approach

  - Does not resort to taking aggressive calls for extraordinary returns but maintains a diversified portfolio of quality stocks with a long-term view.

To summarise...

Both the SBI Long Term Equity Fund and Mirae Asset ELSS Tax Saver Fund are compelling options that offer valuable tax benefits and long-term capital appreciation potential. However, the choice ultimately depends on your individual financial goals and risk tolerance.

Bear in mind that past performance is not an indicator of future results. Both funds remain subject to market risks. Remember, by understanding their distinct characteristics and aligning them with your own financial objectives, you can make an informed decision that best serves your investment journey.

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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.