Equity Linked Saving Scheme (ELSS) is an open ended Mutual Fund Scheme and allocation of fund is largely made into equities and some portion in debt securities to make the investment more viable and reduce the risk. Since the investment is mostly in Equity Market one has to be careful with the investment.
You can read more about ELSS Mutual Funds in the link provided below:-
In this post I will discuss about the Reasons to Invest in the Scheme:-
Short Tenure Lock In Period: As compared to other Investment Schemes like Public Provident Fund and National Saving Certificate, ELSS has a relatively shorter lock in period of 3 years. Thus individuals who are looking for short term investment option may avail it. However, if one is willing to continue with the investment for longer duration, he/she may continue to do so.
Counter Inflation: The return on investment is dependent on the performance of the equity market which promises decent return on the investment. It is observed that the returns is normally higher than the inflation figures/estimates. Whereas, in NSC and PPF are fixed and may end up being lower than inflation.
Ease of Investment: You can chose and invest at your convenience. Investment can be as low as Rs 500 every month. Individual can also increase the amount as per his/her will. Monthly investment through Systematic Investment Plan (SIP) is considered a safer option compared to one time lumpsum investment.
Tax Benefits: Tax Benefits under Section 80C is available on the Investment up to the extent of Rs1,50,000/- respectively. Hence, One enjoys the benefit of investing and tax saving with a single plan. It has also been observed that over longer periods ELSS returns are higher as compared to other conventional investment schemes but both enjoy the similar tax benefits. Return on Investment is also tax free.
Professional Fund Management: ELSS funds are managed by Professional Fund Managers. Thus they try and make optimum use of the funds in order to ensure best possible return to the Investors. Use of experts in pooling and diversification of funds ensure that the funds are professionally managed with the objective of providing the investors with maximum returns.
But like every things in Life, ELSS investment also comes with a “Caveat”:-
Investment is Prone To Market Risk: Since the return is directly linked to market performance and economic scenario, Investment is more prone to risks and one needs to be careful and keep himself abreast with the scenario.
You need to Plan Your Investment: Although you can invest in ELSS at anytime but even then you should be careful with your choice of investment. A bit of research will help you find the best ELSS Fund for investment and also if you can plan your entry at the right time then you will not only reduce the risk but also enhance your returns.