5 reasons why you should invest in ELSS mutual funds

An ELSS fund or an equity linked saving scheme is a scheme which makes it possible for people to save huge money on their tax payments while incurring the profit through equities at the same time. An investor will opt for ELSS funds by people of every age group and in every profession. It is important for an investor to understand what is ELSS funds before investing in them.

There are a lot of benefits which come with investing in equities, like investments and they have to be carried out with care so as to avoid long term risks and the losses which these investments otherwise be prone to. Since it is a good idea to be well acquainted with some of the best ELSS funds which can be invested in. If an investor understands what is ELSS funds, they will understand that the returns can be highly volatile but can compound greatly over the long term.

An Equity Linked Savings Scheme or ELSS fund is an open-ended equity mutual fund which helps an investor save and provide an opportunity to grow money. ELSS mutual funds offer tax benefit and it is always better to understand the ELSS funds meaning before investing in them. That’s why these funds are also known as tax saving mutual fund schemes. By investing in ELSS, an investor can save tax up to Rs. 1.5 lakh as per the section 80c of income tax act. ELSS funds have a lock-in period of 3 years, which means every instalment an investor makes towards ELSS is subject to a 3-year lock in. But these funds are known for providing a lot of benefits to their investors.

Some of the reasons why an investor should opt for ELSS mutual funds are:

  1. The tax saving benefits offered on ELSS mutual funds are the prime reasons for investing in ELSS funds. An investor can avail tax benefits by investing in the funds up to Rs. 1.5 lakh.
  2. This helps in building a habit of investing for a long period. Even though other mutual fund schemes come with long-term investments, they are not bound with a fixed lock-in period, with ELSS mutual funds, an investor needs to invest for a minimum of 3 years. Investing for a long period will help an investor by exempting them from paying taxes on returns earned.
  3. With a long investment option, an investor can allow their funds to grow and redeem the benefits after 3 years. As the ELSS funds invest money in equities, the possibility of earning good returns are high.
  4. After understanding ELSS funds meaning, an investor can inculcate the habit of saving in a systematic way. These funds allow an investor to start an investment with as low as Rs. 500p/m. This builds a habit of investing.

Best ELSS funds allow an investor to invest in stock market. When a normal savings account gives a return of maximum of 8% by investing the funds, they can reap the benefits of high returns.

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