Mistakes to Avoid While Investing in ELSS Mutual Fund

Mutual Fund

The tax savings season is here so now it is high time to save your tax as much as possible. There are so many ways to save your tax, ELSS is one of them. The full form of ELSS is Equity Linked Savings Scheme. The benefits of investing in a good ELSS mutual fund are saved your tax and also enjoy the high return. ELSS saves your tax up to Rs. 1.5lakh under the section of 80C. Here we will concentrate on those mistakes people made while investing in ELSS Mutual Fund.

  • Don’t be late

The first mistake people make is starting late. We invest end of the year while people have to show the proofs of their investments, while they should make that start of the financial year.

So, if you start investing early you don’t have to face that rush of last minute and it also helps you to get the benefit of rupee cost averaging.

  • Don’t select funds based on its current performance

Most investors choose a fund because of its recent performance they don’t check the earlier performance of that fund. Stability and consistency are more important than short term high returns. Investors should focus on those funds which give regular returns for a long term. You must check the at least five years or ten years of that fund’s performance.

  • Dividend? – A big no! No!

If you are choosing the dividend option you should remember one thing you will not get the compounding effect on your money. Growth option is ideal for ELSS. As ELSS is a long term investment growth option is best for it.

  • Stay invested even after the Lock-in Period

 ELSS comes with the three years of the lock-in period. Investors don’t stay invested after the lock-in period they take their money back which is not right. As we know ELSS invests money in the equity market. If that fund is performing well don’t redeem that money.

  • Type of Fund

The common mistake is not checking the kind of or type of fund that they are investing, but it should be checked carefully there are four of kinds Large Cap, Mid Cap, Small Cap, and Multi-Cap. 

While investing in a small cap is risky then small cap has not so much risk. If you want a huge return you can go with a small cap or mid cap but if don’t want to take any risk you just can go with a large cap. 

Lastly, if you want to save your tax and also want to make a handsome return you should consider these points mentioned below:

  • Find a fund which is performing consistently for long years don’t just go for those funds which are giving high returns for the last six months or one year.
  • Choose your risk preference first before you make any kind of investment.
  • Start your ELSS Mutual Fund investment from 1st of April so you don’t have to be rushed at the end of the financial year.
  • Don’t change your ELSS fund every year stick to one or two funds.

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