In case you were too busy keeping track of the inflation numbers, interest rates and the mid cap rally, here is another thought to keep you occupied -- tax saving.

It's September and the 'countdown' to tax-saving-related investment has begun. One investment that must be on the top of your list -- if you are a high-risk investor -- is the tax-saving fund.

Tax-saving funds or the equity-linked saving scheme is the only equity-linked investment (apart from the unit-linked insurance plans) to fall within the Section 88 (tax rebate) gamut of investments. While the 'humble' public provident fund, national saving certificate and life insurance have traditionally been the preferred choice for the tax-saving investor, the ELSS usually gets the short-shrift.

While evaluating ELSS, investors need to look at the long-term performance -- 3 years since there is a lock-in of that period.

In fact, the ELSS gives investors the opportunity to evaluate mutual funds as 'long-term investments'. With an ELSS the fund manager can afford to take a longer view on equity investments as opposed to diversified equity funds where his investment decisions are more short-term in nature.

Of the 5 ELSS short listed by our rankings, 2 belong to the HDFC Mutual Fund stable. HDFC Tax Plan 2000 in particular has an impressive record both over the short term (72.0 per cent over 1 year) as well as the long-term (61.2 per cent CAGR over 3 years).

For the risk-taking investor, ELSS must form a part of his tax-saving portfolio. Equities do better over the long-term (at least 10 years) vis-à-vis bonds, gold and property. ELSS have a 3-year lock-in and they witness lower volatility as the fund manager can plan his investments better. Currently when inflation is the big bugbear of every investment, only an equity-linked investment like the ELSS can help investors post superior returns net of inflation (i.e. real return).

Investors who don't have the time to track equity markets and are put off by the constant ups and downs in equities, can opt for the systematic investment plan. Investors who are wary of investing a large amount in ELSS (there is a limit of Rs 10,000 to avail of Section 88 benefit) can invest smaller amounts.

Most ELSS have a minimum investment limit of just Rs 500, which is a reasonable amount for even the risk-averse investor who can invest a smaller amount in the ELSS and remain pre-dominantly invested in PPF and NSC.

• Click here to get a free guide to financial planning