4 types of ELSS funds in India

Investing in ELSS tax saving funds will get a tax deduction under section 80c of the income tax act, 1961 for investment up to Rs. 1.5 lakh per annum. An ELSS fund has a lock-in period of three years for ELSS funds and they will have to hold them for a certain time period if an investor wishes to benefit from the tax deduction. When an investor opts for ELSS funds from the different types of mutual funds, they are investing in open-ended mutual funds that help an investor save and provide a chance to grow money. These mutual funds offer tax benefits. ELSS mutual funds allow an investor to save money on their tax payments while incurring the profit through equities and they have to be carried out with care for avoiding long term risks and the losses that these investments are prone to. ELSS funds help in building a habit of investing for a long period, these funds allow an investor’s funds to grow and redeem the benefits after 3 years.

4 Types of ELSS funds in India are:

  1. Large cap ELSS funds:

Large-cap funds are those funds that invest a large proportion of their corpus in companies with a large market capitalization. In the large-cap equity-oriented funds the underlying companies in the portfolio will be considered as relatively steady compounders of wealth and pay regular dividends. As far as the risk-taking capacity goes, there are the best ELSS funds for investors who have a low appetite for risk and are relatively patient with expectations of returns on investment.

  1. Mid cap ELSS funds:

Mid-cap funds are mostly invested in mid-cap companies however, the underlying stocks are considered volatile. A well-diversified portfolio, market timing and accurate analysis is necessary for mitigating investor risk. Mid-cap funds are the best ELSS funds for an investor, if they are looking for high returns and they have a high-risk tolerance than what can be gained from investing in large-cap equity-oriented funds.

  1. Small-cap ELSS funds:

Small-cap funds also tend to outperform large-cap funds at specific phases of market movements. The stocks of small-cap companies typically have the highest growth potential, since the underlying companies are young, and they are eager for expanding aggressively. They are more vulnerable to a business or the economic downturn, making them more volatile than large and mid-caps. They are the best ELSS funds option, if an investor has a high capacity for risk and are expecting great returns in short time frames.

  1. Multi-cap ELSS funds:

Multi-cap ELSS funds are diversified equity-oriented funds that invest in stocks of companies with different market capitalizations. The proportion of stocks are curated for meeting investment objective of fund. Multi-cap funds are generally considered to compound wealth better than other categories of funds since they can take advantage of the different investment opportunities in the market. They are the best ELSS funds option for an investor who is waiting for a long-term wealth creation and are moderate risk takers.

Comments are closed