Skip to main content

Know before Investing in ELSS

Among the various options that are available to save tax, one of the most promising is equity-linked savings schemes (ELSS).

ELSS are diversified equity mutual funds that invest a major chunk of your money in equity and equity-related securities. The fund manager looks for securities of companies which have a strong growth potential and a resilient business model.

ELSS funds offer you a convenient way to avail tax advantage coupled with trying to generate higher returns by harnessing the potential of the equity markets.

Investing in ELSS funds makes you eligible to avail tax deduction of up to Rs 1.5 lakh under section 80C of the Income Tax Act, 1961.

Things to keep in mind as an investor

ELSS funds happen to be the most efficient way to grow wealth and enjoy tax benefits. However, there are certain things you need to keep in mind before investing in ELSS.

1. Good way to get exposure to equity markets

It might be possible that you desire to invest in equities but don't know where to start. Try ELSS funds as your first step. As compared to directly investing in stock markets, ELSS funds are an ideal way to get exposure to equities.

Along with professional fund management, you get the benefit of a well-diversified portfolio at a nominal initial investment. You may initiate a systematic investment plan (SIP) of as low as Rs 500 and stay tension free from timing the market.

One thing that you need to be aware of is that ELSS comes with a lock-in period of three years. In case you can block your surplus funds for such period, ELSS funds is a wonderful way to enjoy potential of equity stocks.

2. Lock-in period of investment

Among all other tax-saving products offered under Section 80C, equity linked savings schemes (ELSS) has the shortest lock-in period. It has a lock-in period of 3 years which means that you cannot redeem your investment before completion of 3 years. Comparatively, a Public Provident Fund (PPF) has a lock-in period of 15 years and National Savings Certificate (NSC) comes with a lock-in period of five years.

Having said that, you should not perceive ELSS funds as a short-term investment haven. ELSS, being an equity investment, need you to have a long-term investment horizon of at least 7 to 10 years. Additionally, you have to be goal-oriented while investing in ELSS funds to ensure that you can make the most of the investment.

3. Risks involved in investment

ELSS funds invest mostly in equity stocks of companies. Equity funds carry a higher risk of fluctuation in Net Asset Value (NAV). Owing to this, ELSS funds may seem a risky proposition to a budding investor. However, this should not deter you from taking the benefit of such investments.

All you need to do is stay invested for a longer investment horizon. As compared to other asset classes, equity funds have found to give above average returns in the long run. It does this by overcoming the volatility which the fund returns undergoes in the short run.

4. Maximum tax exemption limit

Section 80C is an extensive section which includes numerous investment avenues, like Employees Provident Fund (EPF) and life insurance policy, that are eligible for tax deduction. The maximum tax exemption limit available under Section 80C is Rs 1.5 lakh. If you have already claimed some of the exemption via other investments, then your entire investment in ELSS may not be available for deduction. Thus, before finalising your investment amount do remember to perform some basic calculations to make an informed decision.

5. Expectation of maximum returns

Being an equity-oriented investment, ELSS funds have the potential to generate higher returns than other investment avenues. But you cannot be unrealistic about returns on investment. Moreover, there are no guaranteed returns in equities. The fund performance may vary across different time horizons. Only when you stay invested for a longer investment horizon, could you hope for higher returns.


The best way to approach ELSS funds is to make a detailed plan at the start of the financial year. Don't postpone your tax-saving investments late in the year. A goal-oriented and planned approach will help you to select the right ELSS fund that suits your requirements.




SIPs are Best Investments as Stock Market s are move up and down. Volatile is your best friend in making Money and creating enormous Wealth, If you have patience and long term Investing orientation. Invest in Best SIP Mutual Funds and get good returns over a period of time. Know which are the Top SIP Funds to Invest Save Tax Get Rich - Best ELSS Funds

For more information on Top SIP Mutual Funds contact Save Tax Get Rich on 94 8300 8300

OR

You can write to us at

Invest [at] SaveTaxGetRich [dot] Com

Popular posts from this blog

Stocks with a high dividend yield

Buy Gold Mutual Funds Invest Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Call 0 94 8300 8300 (India) Stocks with a high-dividend yield can provide investors additional cash flow. More importantly, it is tax-free   With April 2011 just over, the 'earnings season' is well and truly here. This is the time most companies pay out a portion of their profits as dividends to shareholders. Since dividends are tax-free, they are an attractive income source with a select class of investors, who depend on these for additional cash flow. SIGNIFICANCE A company doing well and generating profits will usually be in a position to declare dividends regularly. Hence, a key parameter one should look at whilst investing in a stock is whether the company has a good dividend record. Typically, dividend yield stocks are large-caps and generally not capital-intensive. This is suggestive of the fact that the downside risk on...
Read more

Mutual Fund Review: Religare Tax Plan

Tax Plan is one of the better performing schemes from Religare Asset Management. Existing investors can redeem their investment after three years. But given the scheme's performance, they can continue to stay invested   Given the mandated lock-in period of three years, tax saving schemes give the fund manager the leeway to invest in ideas that may take time to nurture. Religare Tax Plan's investment ideas revolve around 'High Growth', which the fund manager has aimed to achieve by digging out promising stories/businesses in the mid-cap segment. Within the space, consumer staples has been the centre of attention for the last couple of years and can be seen as one of the key reasons for the scheme's outperformance as compared to the broader market. It has, however, tweaked its focus and reduced exposure in midcaps as they were commanding a high premium. The strategy seems to have worked as it returned a 22% gain last year. Religare Tax Plan has outperformed BSE 100...
Read more

Systematic withdrawal plan

  Start Systematic withdrawal plan Online Although an SWP gives you regular income and saves on taxes in the long term, you cannot open an SWP on a scheme where you have an ongoing SIP   iStockPhoto If you are planning to take a sabbatical from work or are retiring soon, you may be looking at different investment options that give a regular income. Usually, a lump sum is invested to get regular fixed amounts later. Popular products include post office monthly income scheme, Senior Citizens' Savings Scheme and monthly income plans (MIPs). A lesser known option is the systematic withdrawal plan (SWP) in mutual funds. Recently, some funds have even removed the exit load on SWPs if you were to withdraw up to 15-20% in the first year, to encourage people who want to start investing in this instrument. Here is a look at what an SWP is. WHAT IS SWP? Many of us would be familiar with a systematic investment plan (SIP ), where a corpus ...
Read more

Mutual Fund Review: Tata Balanced

  It underperformed severely at first, but Tata Balanced has shown its mettle in the past five years… After five years of severe underperformance, the fund began to pull up its socks in 2002 and delivered a brilliant performance in 2003. Such a top quartile performance was repeated only in 2007 and 2009. By and large, this fund is not known for its outstanding returns, but over a long-period of time, its investors won't be unhappy. Over the past five years ended May 31, 2011 it has delivered an annualized return of 14 per cent (category average: 11%).   In 2008, it was the high exposure to Metals and Capital Goods that hit the fund hard. Towards the end of that year, exposure to both the sectors was reduced significantly while that to FMCG was increased. Once the market began to rally in 2009, the fund manager immediately reduced allocation to FMCG from 16 per cent (March 2009) to 4 per cent (May 2009) and exposure to Technology began to increase. These moves helped the fund...
Read more

JP Morgan launches Emerging Markets Opportunities Equity Offshore Fund

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300 JP Morgan launches Emerging Markets Opportunities Equity Offshore Fund    The new fund offer opens for subscription on 16 th June and closes on 30 th June. JP Morgan Mutual Fund today announced the launch of its open end fund of fund called Emerging Markets Opportunities Equity Offshore Fund. The fund will invest in an aggressively managed portfolio of emerging market companies in the underlying fund - JPMorgan Funds - Emerging Markets Opportunities Fund, says a JP Morgan press release. Noriko Kuroki, Client Portfolio Manager, Global Emerging Markets Team (Singapore), JPMAM said, "Emerging markets have been out of favour for several years, as growth decelerated and earnings struggled. However, in a world of globalisation, we believe that EM will eventually re-couple with DM, leading to the long-aw...
Read more
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now