ELSS VS FD: If You Saved Rs 1 Lakh a Year Since 2010 — Here’s What You’d Have Today

Saving regularly is a good habit that builds the foundation of future financial stability. But to grow your wealth and beat inflation, it is important to prioritise investments. For many salaried professionals and even retirees, Equity-Linked Savings Schemes (ELSS) and Fixed Deposits (FDs) are among the most popular investment schemes.

ELSS are tax-saving mutual funds with a mandatory three-year lock-in period, and they primarily invest in equities, offering higher potential returns linked to market performance. They provide tax benefits under Section 80C and have the potential for capital growth but carry market-related risks.

In contrast, Fixed Deposits (FDs) are traditional savings instruments providing fixed interest rates, with low risk and relatively assured returns. The interest from FDs is taxable as per individual income tax slabs, which affects post-tax returns.

For our calculation, we will consider 15 years (2010 to 2024), a total investment of Rs 15,00,000 (Rs 1 lakh invested each year):

Investing In FDs:

For the calculations, we have assumed an annual interest rate of 7% for all the investments.

https://docs.google.com/spreadsheets/d/1_2z020wh4SmE6EQXc6tztR3QwQ9keA38IGMPyjyUED8/edit?gid=0#gid=0

Investing In ELSS:

For the calculations, we have assumed an annual interest rate of 12% for all the investments.

As the above calculations demonstrate, there is a significant difference between what you can get by investing in the two instruments over the long term. ELSS edges out FD for long-term goals like retirement or kids' weddings.

The difference between ELSS and FD boils down to one word: risk. ELSS exposes you to market volatility while FDs keep you protected from it. FD suits conservative investors preferring guaranteed returns with capital safety, though offering lower, taxable yields.

An investor diligently saving Rs 1 lakh annually since 2010 would have far more wealth accumulated today in ELSS compared to FDs.