Benefits of investing in ELSS Funds

Equity investors often lose their funds in the market. The primary reason for this is taxation. It significantly lowers investment growth and affects their returns. To avoid this, many opt for an Equity Linked Saving Scheme. An ELSS is an investment scheme associated with equities. It invests most of the funds in equity-related products. It is ideal for investors who wish to avoid paying taxes.

Besides tax benefits, investing in ELSS garners a bunch of other advantages. Here are some of them:

Lock-in duration

Usually, good Mutual Fund schemes are secured for long-term investments. But they are not included in the lock-in periods. This impacts the investor’s growth considerably. In an ELSS Fund, however, your wealth is secured for at least three years. For example, you invested Rs. 500 and got 50 units on March 31, 2021. In this case, your lock-in period will end on March 30, 2024. This period gives your funds enough time to attract significant returns.

Long-term value

As the lock-in period in ELSS funds is extendable beyond three years, investors get the chance to sustain their wealth accumulation. They are also allowed to redeem it once the tenure ends. The tax exemption feature facilitates this further.

Minimum initial investment amount

The minimum investment in ELSS funds can be as low as Rs. 500 through the Systematic Investment Plan or SIP option. Hence, it is accessible to individuals who have just started earning. It empowers them to turn their savings into investments.

Ideal for first-time investors

A Mutual Fund Investment may sound intimidating to new investors. Since they have little market knowledge, they need a scheme that is not too complex. For such investors, an ELSS serves as a viable option. It gives them the freedom to invest without having to bear taxes.

Higher returns

This Mutual Fund is known to generate high returns. It increases your investment significantly in a short to medium duration. Unlike other investment schemes, it does not permit partial withdrawals. This facilitates the growth of your invested capital. It allows it to increase with time.

Upper limit

In ELSS Mutual Funds, investors can invest as much as they want. There is no maximum limit for investing. This broadens its potential to big, seasoned investors who wish to make a Lumpsum investment.

Types

An ELSS fund has three types: growth, dividend, and dividend reinvestment. Under the growth scheme, the investor receives gains only during redemptions. In the dividend scheme, the investor is obligated to receive timely dividends. And in the dividend reinvestment scheme, investors can reinvest dividends in it again.

Safe & reliable

These funds are one of the safest types of Mutual Funds. Despite carrying specific market risks, they deliver good returns if dealt with consistently. Moreover, Mutual Funds, in general, are handled by professional fund managers. This leaves no room for fraudulent activities.

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