Mutual fund schemes that provide tax benefits not only helps in reducing an investor’s tax liability but also aids in creatingwealthin the long run. Such schemes are popularly known as ELSS funds– Equity Linked Savings Schemes. As the name suggests, ELSS mutual funds invest the majority of their portfolio, a minimum of 80% in equity and equity-related instruments. If you are hoping to save tax by investing in ELSS mutual funds, there are many tax-saving mutual funds to select from. However, there isn’t a single scheme that can be associated with the best mutual fund scheme. This is because the returns are not guaranteed and mightvarywith time.
The stock market seems to be perilously poised as of now. While the index levels are nearly back to how they were, the economic situations do not look quiteauspicious anytime soon. But, that is precisely the circumstances that long-term investors investing in equities should ignore. Being hesitantabout investing in mutual funds because the market is low currently is the wrong way of looking at mutual fund investments. Experts believe that there is no such thing as the right time to invest. Andonly those investors who try to get rich quickly worry about such short-term market volatilities.
ELSS investors have their wealth locked-in for a period of 3 years. Even if the returns are littleas the market has turned turtle after the lock-in has ended, the investors may continue without exiting their investments in ELSS. As and when the market rises and the NAV (net asset value) of schemes upsurges, the exit could be planned. If you decide to invest in ELSS funds, you must not fret about the current or past state of the market, but rather focus on the future instead. Experts believe that staying invested for an extended period in ELSS schemes not only helps with tax saving but also increases the probability of earning healthy returns.By the way, the average 3-year returns on ELSS schemes is just around 1.03%.This figure is likely to get better if the investors continue investing without exiting the ELSS scheme. The average 10-year returns on ELSS categoryis around 9.27%
If you are new to the investing world and are wondering how to invest in ELSS, here’s how you can do it. You can invest in ELSS funds, directly from the fund house or through designated mutual fund distributors. But, selecting the apt ELSS funds is equally essential. It is always recommended to consult a financial advisor or an expert who has a proven track record of beating the markets. Looking at historical data and star-ratings alone is not enough to pick quality ELSS mutual funds. Remember, past success does not promise future success.
Investments in ELSS mutual funds should be a well-thought decision after taking into account all the factors. So judiciously analyse your investments. Happy investing!