The popularized as ELSS funds, equity-linked savings schemes are still struggling to make their way into the Indian market. Most investors, afraid of the equity market, choose life insurance or provident funds for tax savings. These products are still a few decades old and are very common among taxpayers. However, these products are losing their market share due to rising inflation and low returns. Investors are now looking for those products that provide long-term growth and help build wealth. ELSS is a product that offers both, but people hesitate to invest in it due to the risk/volatility associated with the product.
Some questions before investing in ELSS
Any investment that produces returns over and above inflation is better for investors over the long term, and ELSS mutual funds are outstanding in the category of tax saving instruments.
Let us try to focus on the below questions today and find out which group of investors can avoid these funds and also in which case that one should stay away from ELSS funds.
- But are these funds suitable for an investor?
- Does this fund suits every category of investors?
- Are these funds able to deliver good short-term returns?
But, are these funds suitable for an investor?
Yes, these funds are suitable for an investor. While there are many benefits to investing in equity, such investments should be made with caution to minimize the long-term risks and losses that these investments might otherwise incur. For this reason, it is a good idea to get information about some of the best ELSS funds that can be invested.
Does this fund suits every category of investors?
Yes, this fund suits every category of investors. ELSS funds are equity-linked savings schemes, which enable people to save vast amounts of money on their tax payments, while at the same time generating income from equity. There are buyers for ELSS funds in every age group and every business.
Are these funds able to deliver good short-term returns?
Yes, these funds are capable of giving good short-term returns. The ELSS has the shortest lock-in period when compared to other instruments (PPF- 15 years, NSC- 6 years). That makes ELSS one of the most attractive tools for investment.
ELSS mutual fund schemes are risky (the term itself is subjective) as the equity of these schemes is more than 65%. Many funds hold 95% of the capital. Fund managers, however, reduce risk by diversifying the fund portfolio. The considering the diversification and lock of the fund over three years, extensive losses are unlikely to be incurred by the fund. Your ELSS investment, like any other multi-cap fund, is excellent.
The best way to start investing in equity is to invest in ELSS. Investing in this asset class requires both a disciplined approach and a long-term approach, and both aspects are taken care of by ELSS. Investing in mutual funds provides the necessary stability and a lock-in period of three years provides the expected time for portfolio success, as short-term equity investments can be volatile. A person is liable for a tax benefit of up to Rs 1.5 lakhs under Section 80C of the Income Tax Act. ELSS’s long-term capital gains and dividends are also tax-free.