Warm Greeting To Our Readers!
ELSS (Equity Linked Saving Scheme), is a mutual fund scheme that is included in Section 80C of the Income Tax Act. That means, investing in this fund can help you save up to 1.5 lakh of tax from your annual tax regime.
There are also other tax-saving tools under Section 80C like fixed deposits, RD, Public Provident Fund, National Pension Scheme, and many more, but out of all these ELSS is preferred more because not only does it help you save tax but also creates wealth!!
The ELSS mutual fund offers high returns, it has a higher risk compared to other avenues like PPF, life insurance policies, etc. Well, some smart investing tips and tricks can help an investor invest smartly in ELSS, manage the high risk and create big wealth from their investment.
Here are the smart tips and tricks to invest in ELSS!!
Choose SIP, Not Lump-sum!
Financial experts suggest, while investing in ELSS, don’t invest all amount in one go, at the end of the year. They say ELSS funds are equity category funds, thus investing in these funds via monthly SIP help buy units smartly and create big wealth in long term.
Also, they say if investing in ELSS is for tax saving purposes, then don’t push the plan to the last moment, instead start a SIP in an ELSS fund from April through the whole financial year so that you do not get worried by the volatility.
Do Evaluate Long-Term Performance!
When people invest in any fund, they generally look at the recent performance however experts suggest do consider evaluating past performance also.
Investors should not only look at the 5-7 years of performance of a scheme but also how long the fund manager has been at the helm of the fund. This helps them know about the strategies used by the fund manager to deal with the market volatilities.
Do Not Choose Dividend While Investing In ELSS!
Tax rules have changed in the past two years. Dividends are now taxable, as are long-term capital gains beyond Rs 1 lakh. While it is possible to manage and adjust the tax on capital gains, the dividends are added to income and taxed at normal rates. So, don’t go for the dividend option in your ELSS fund.
Keep Monitoring While Investing!
While holding equity funds for long periods is a good strategy and helps build wealth in the long term, investors need to monitor their portfolios as well. This helps you identify which fund in your portfolio is performing as per your goal, and which fund is underperforming its benchmark.
You can also think of replacing your underperforming fund with another suitable fund. Before you take any action do consult your financial adviser.
How to Know Which ELSS Fund Is Best For You?
Financial experts say, pick the best ELSS mutual fund scheme for you based on your risk capacity. Like if you can take high risk in your investing then pick ELSS schemes associated with high risk. These funds have over 40% of their corpus in mid-and small-cap stocks, these funds can be very rewarding in bullish times.
If your risk capacity is moderate then, pick ELSS schemes associated with moderate risk. These schemes have 75-80% of their corpora in large-cap stocks so will not be very volatile. But returns will also be relatively sedate.
You can contact us at Shri Ashutosh Securities Pvt Ltd., we are here to help you in any way possible. Keep reading our article and stay updated with the latest news about Mutual Funds!
(Mutual Fund investments are subject to market risk Illustrations are for example only, there is no guarantee of returns. Past performance is not an indicator/guarantee of future returns).