ELSS funds are diversified equity mutual funds that invest a huge chunk of your money in equity and equity-associated securities. You know amidst the myriad of options that are available to save tax, one of the most popular and promising is known as equity-linked savings schemes (ELSS).
It is true that this fund caters you a convenient way to avail tax advantage mingled with trying to produce higher returns by connecting the potential of the equity markets. If you invest in ELSS funds, it would make you eligible to avail tax deduction of up to nearly Rs 1.5 lakh under section 80C of Income Tax Actyear, 1961. Of course, now you must be thinking How to invest in ELSS right?Before you start investing have a look at some important things being an investor:
Things Investors should keep in mind
ELSS funds are proving 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.
Good way to fetch exposure to equity markets
It could be possible that you desire to invest in equities but you have no idea about where to start. You can start with ELSS funds as your first step. You know as compared to directly investing in stock markets, ELSS funds are definitely a perfect way to get exposure to equities. Moreover, along with professional fund management, you experience the benefit of a well-diversified portfolio at an insignificant initial investment. You may induct a systematic investment plan (SIP) of as low as Rs 500 and stay relaxed from timing the market. However, there is a vital thing that you have etc be aware of. It is that ELSS comes with a lock-in period of 3 years. Ifyou can afford to block your surplus funds for such period, ELSS funds area great way to relish potential of equity stocks.
It is lock-in period of investment
Amidst all other tax-saving products catered under Section 80C, equity linked savings schemes havecertainly the shortest lock-in period. It has a lock-in period of three years and it means that you cannot cash your investment before completion of 3 years. Similarly, a Public Provident Fund (PPF) has a lock-in period of fifteen years and National Savings Certificate (NSC) is there with a lock-in period of five years.
Having this thing in mind, you should not perceive ELSS funds as that of a short-term investment haven. ELSS, being an equity investment, requiresyou to own a long-term investment prospect of at least seven to ten years. Additionally, you have to be aim-oriented when you invest in ELSS funds to make sure that you can make the maximum of the investment.
Thus, there are many things that you would get to know about ELSS funds once you start investing in them. Of course, you can always talk to professionals if you have any doubts in mind.