Even though investing in mutual funds is seen to offer higher returns than fixed investment options, most people still seek tax advantages in mutual funds. Investing in mutual funds helps reduce taxes and grow the investment over the long term.
ELSS is one such mutual fund. As its name suggests, under this Equity Linked Savings Scheme (ELSS), savings are invested in the stock markets. ELSS is a diversified equity mutual fund, which is generally sought after by investors to save tax while investing in this fund. At least 65 percent of the ELSS fund’s assets are invested in the stock market. Investments in equity linked savings plans are diversified and invested across all sectors and industries unlike other fund options such as sector funds, financial services, infrastructure.
If you are looking to save tax by investing in ELSS, there are several MFs to choose from which provide tax savings. time.
Currently, even though the stock market appears to be in a better position, in fact surpassing pre-COVID levels, economic conditions do not look very promising, however. Having said that, industry experts say long-term equity investors should ignore such a situation and shouldn’t hesitate to invest in mutual funds as the market is low at this time.
This is always a good time to invest in mutual funds, however, for those looking to achieve high returns in a short period of time, note that the short term market changes quickly.
With ELSS, investors have their savings blocked for a period of 3 years. If the returns on your investment are low because the market has not performed well after the foreclosure ends, you can continue with the fund without exiting.
You can plan the exit as the market rises and the regimes NAV increases. Experts say people who invest in ELSS funds don’t have to worry about the past or current state of the market. Not only do you get an initial benefit in the form of tax savings, but you also get good returns in the long run if you stay invested.
New investors can invest in ELSS directly from a fund company or through online mutual fund distribution platforms. That said, choosing the right ELSS is just as important. Experts suggest that one should not decide alone, especially new investors, as they are not equipped to choose their own mutual funds. Hence, it is better to take the help of a planner or financial advisor, who has a proven track record of beating the markets.