ELSS Funds carry a relatively higher risk as compared to debt funds
and balanced funds
. The NAV of the fund may fluctuate on account of market swings. As these funds have a well-diversified portfolio, the risk gets spread out among the underlying securities which are held by the fund. In addition to this, when you stay invested for long term, these risks tend to smoothen out to give you average returns. As compared to other funds, the fund manager of an ELSS Fund is better positioned to take comprehensive bets due to the three year lock-in period. It results in higher return on investment for the investors. Historically, ELSS funds have known to deliver average returns of around 12%-15% over a period of more than 5 years.