ELSS units come with a mandatory 3-year lock-in from each purchase. A natural question is what happened to lump-sum holders after that lock-in ended. This post looks at how often historical ELSS holding windows ended in a loss, by holding horizon.
Key Takeaways
- In the observed windows, ELSS loss probability fell from 18.62% at 1Y to 2.97% at 3Y, 0.35% at 5Y and 0.00% at 7Y and 10Y.
- At 3Y, which matches the lock-in length, 2.97% of 129,133 windows still ended with a negative annualised return.
- The 7Y horizon is the shortest where no loss was observed: 66,816 daily rolling windows across 40 Direct Growth schemes.
- The weakest 7Y window returned +5.12% CAGR (Union ELSS Tax Saver Fund, 2013-03-23 to 2020-03-23).
- The sample covers currently active schemes only, so survivorship bias applies. All figures are lump-sum, point-to-point returns.
How the Numbers Were Built
The study uses daily NAV history for Direct plans, Growth option (1 series per scheme). The data start on 2013-01-01, when Direct plans launched. A rolling window means: pick a start date, hold for N years, and record the annualised return (CAGR). Repeat for every calendar day, for every scheme.
Window counts below are daily rolling windows pooled across the stated number of schemes. They are not scheme counts. The data are internally validated.
The universe is currently active schemes only. Closed or merged schemes are excluded, which is a survivorship-bias limitation. 23 schemes were also excluded because they have no Direct Growth plan.
Loss Probability by Holding Horizon
| Horizon | Daily rolling windows | Direct Growth schemes | Windows with a loss |
|---|---|---|---|
| 1Y | 164,462 | 49 | 18.62% |
| 3Y | 129,133 | 48 | 2.97% |
| 5Y | 96,764 | 41 | 0.35% |
| 7Y | 66,816 | 40 | 0.00% |
| 10Y | 30,634 | 25 | 0.00% |
Loss frequency falls at each longer horizon tested. At 7Y it reaches 0.00%, and it stays at 0.00% at 10Y.
What the Worst Windows Looked Like
| Horizon | Weakest window (annualised) | Median |
|---|---|---|
| 1Y | -46.91% | 12.38% |
| 3Y | -19.07% | 17.15% |
| 5Y | -6.29% | 16.39% |
| 7Y | 5.12% | 15.26% |
| 10Y | 8.66% | 15.41% |
The weakest 3Y window ran from 2017-03-30 to 2020-03-30 (Sundaram Long Term Micro Cap Tax Advantage Fund Series IV Direct Plan - Growth). The weakest 5Y window ran from 2015-03-23 to 2020-03-23 (Nippon India ELSS Tax Saver Fund). The weakest 7Y window still ended at +5.12% CAGR.
The 3-Year Lock-In in Context
The lock-in is 3 years from each purchase. Looking at 3Y windows, 2.97% ended with a negative annualised return. The 3Y window's loss rate depended heavily on when it started: windows beginning in 2017 showed 30.86% losses, while those beginning in 2013, 2014 and 2015 showed 0.00%.
Longer horizons look different in this sample: 5Y windows showed 0.35% losses overall, with the highest start-year figure (4.01%) for 2015 starts. 7Y windows showed 0.00% for every start year from 2013 to 2019.
Against an Inflation Threshold
Using a 6.0% threshold, the share of windows with an annualised return above it was 65.16% at 1Y, 92.71% at 3Y, 96.15% at 5Y, 99.97% at 7Y and 100.0% at 10Y.
Caveats Worth Reading
- Survivorship bias. Only currently active schemes are included.
- Narrow start-date range. 7Y windows start between 2013 and 2019, and 10Y windows between 2013 and 2016. Daily windows overlap heavily, so they are not independent observations.
- Different scheme sets. Scheme counts differ by horizon, from 49 at 1Y to 25 at 10Y.
- No cause shown. The data show how often losses occurred, not why.
- Lump-sum only. Other holding periods were not tested.
- History is not a forecast. 0.00% describes the observed windows only.
Frequently Asked Questions
What does 0.00% loss probability at 7Y mean?
Across 66,816 daily rolling 7Y windows on 40 Direct Growth schemes, none ended with a negative annualised return. The weakest window returned +5.12% CAGR. It describes the observed windows, not future outcomes.
Does the 3-year lock-in end at a loss-free point?
In the observed windows, not entirely. 2.97% of 129,133 rolling 3Y windows across 48 schemes ended with a negative annualised return. The weakest was -19.07% CAGR.
How were the rolling windows constructed?
Each window starts on a calendar day from 2013-01-01 and runs for the horizon length, using daily NAV forward-filled over non-trading days. Returns are annualised CAGR on Direct plans, Growth option.
Why might the 7Y and 10Y results be less robust?
7Y windows start between 2013 and 2019, and 10Y windows between 2013 and 2016. They overlap heavily, cover fewer schemes (40 and 25) and exclude closed or merged schemes.
Do these figures include SIP investing?
No. Every statistic is a lump-sum, point-to-point return.
This is educational content, not investment advice; consult a SEBI-registered investment adviser.