What is ELSS Fund?
tax saving mutual funds
An Equity Linked Saving Scheme or elss mutual funds allows the HUF or an individual a deduction from their total income of about rupees 1.5 lakhs under Section 80C of 1961’s Income Tax Act. Hence, if an investor wants to invest fifty thousand rupees in an Equity Linked Saving Scheme, then this amount will be deducted from their total taxable income. Therefore, this helps in reducing the tax burden. ELSS are also called tax saving mutual funds.
ELSS is an investment plan that has a brief lock-in period of 3 years from the date of allotment of the units. Once the lock-in period has expired, the investor can switch or redeem their units. ELSS offers both dividend and growth options. When compared to the standard FDs, investors who opt for ELSS are provided with a higher return in order to beat the inflation effectively and efficiently. Investors also have the option to invest in ELSS via systematic investment plans or SIP.
What are SIP or Systematic Investment Plans?
SIP or Systematic Investment Plan is a unique investment route where the investor has the option to invest a specific amount in their preferred Mutual Fund scheme. They have to make payments at regular investments, which can vary from once a quarter to once a month. In addition to that, the installment amount can also be as low as five hundred rupees a month or five thousand rupees a month. Paying installments is easy as the investor can provide their bank with standing instructions for debiting the amount on time.
Indian Mutual Funds investors are quite impressed by SIPs as it helps them in making investments in a systematic and disciplined manner without having to worry about the market timing or market volatility. Investors do not have to time or evaluate the market. They can buy more units when the market is low. This would help them in reducing the overall cost of their investment. Moreover, the profit is calculated in compound interest that ensures better and maximum long-term benefits when compared to a lump-sum one-time investment. Through SIPs, investors can invest early on a long-term basis to maximize their end returns and meet their financial goals.
How can you fulfill your financial goals?
Fulfilling your financial goals is quite easy only if you know the correct way to do it. The first and most important thing that you need to do is select the perfect scheme that would suit your investment requirements. You can even choose a combination of schemes that would help you to cater to different financial needs.
If you are looking for long-term goals, you can invest in equity funds. In case you are looking for medium-term goals, then go for income funds. Lastly, you can also invest in liquid funds if you do not want to keep your money locked up for a long time. Depending on the extent of risk that the investors are willing to take, they can invest in multiple schemes of similar asset categories. The investor has to evaluate their unique investment requirements to find out which Mutual Fund scheme is perfect for them.