Equity Linked Savings Scheme (ELSS) is one of the most popular tax saving instrument. An ELSS comes with a lock-in period of three years and they invest in the multi-cap fund. You can save up to Rs.1.5lakh under the section of 80C. ELSS provides a balance between returns and volatility to its investor and it is also a diversified scheme.
As we all know that equity has three years of lock-in period so there are so many people who redeem their money after three years but it is advisable to stay invested at least for five to seven years for a good return. There are two types of ELSS they are – Open-Ended ELSS, Close-Ended ELSS.
- Open-Ended ELSS- In this open-ended scheme, an investor can move their money from the fund after three years. This is the most common or popular in India’s equity market.
- Close-Ended ELSS- In this scheme investors can’t move their money for a specified time period which can be greater than three years. The lock-in period will be more than three years and you only can make this ELSS while NFO (New Fund Offer) is going on. You can’t make this investment after the NFO period.
Tips to invest in ELSS Mutual Fund
- What is your financial goal? – First of all, you need to know or understand what your financial goal is while you are investing in ELSS. A good ELSS fund can do a lot more than just saving your tax. You must start planning your investment you can note down all your financial goals which can be your retirement goal, kid’s education or buy a home whatever it can be you need to make a rough estimate of that amount you want to save to meet your goal.
- Right Scheme– So, after you plan your financial goal you must understand in which ELSS fund you should invest. There are so many ELSS funds are available in the market so do not get confused with it. Choose a fund which is giving a constant return don’t just go for a fund by checking its last return, check that ELSS funds last five years return which fund house and fund manager is managing that fund and what is the annual expense ratio of that fund check everything carefully before investing in ELSS Fund .You also can take financial advisors to help with your ELSS investment.
- Corpus Size matters– Remember one thing bigger is always better! You must know the aum size of that fund if you are investing in an ELSS fund you have to check the ELSS fund size also you should compare to other ELSS schemes fund size. A bigger AUM size means that particular ELSS scheme is restated by a lot of other investors too.
- Scheme age– We all know one thing that age of scheme really matters on ELSS mutual fund if you are investing for a good return invest in a fund which has completed five or ten years in the market because that fund had seen the ups and downs in the market. So it is the better option if you are investing in ELSS goes for a fund which is old.
So here we are giving all the tips in a nutshell.