For a first time investor ELSS funds returnss provides to be a unique gateway. The sad aspect is that people often end up making sub optimal decisions in terms of investment. To a first time investor it is one of the popular investment avenues suggested. The number game in terms of people opting for this scheme has been on the rise. People are keener to explore the benefits offered by this scheme
Any investment in ELSS funds entitles you to a tax deduction of 1, 50,000 as per the current financial year in relation to section 80 C of the Income tax act. Perhaps the only scheme where individuals can save tax and earn higher returns on their investment is equity schemes.
In comparison to other tax saving funds has the lowest lock in period
With ELSS the lock in period is of 3 years, whereas other investment tools have a lock in period of 5 years. This period is relatively lower when you compare it to PFF that is of 15 years and a fixed deposit of 5 years. ELSS funds with a lowest investment period provide you with the highest rates of return.
Cash in on the power of compounding
A suggestion would be to stay invested in equity based funds for a long horizon may be 5 to 7 years. By virtue of their lock in period they provide you with an option of disciplined investing. So it helps an investor by the power of compounding in the long run.
There is no fixed rule that it has to be redeemed after 3 years
For an investor if they are happy with the returns of ELSS funds, the onus is on them to continue. Therefore it would mean that the redemption is not compulsory after 3 years. This specifies to be minimum investment duration, but there are other investment options.
Higher rate of returns
As ELSS funds go on to invest in stocks, comparatively the rate of returns is higher as compared to other fund sources. In terms of numbers it is 15 % to around 10 %. In due course of time say 3 years or so the power of compounding along with equity goes on to provide higher returns for an investor.
When you are choosing to invest in ELSS funds you can opt for SIP option. This is a method where an investor can put a certain sum of money at periodic intervals. This would also mean that the salaried class can set aside a portion of their earnings every month towards SIP.
In addition investing in mutual funds is a transparent and a safe process. All the mutual fund houses are under the scope of SEBI and need to comply with various disclosures.
To sum it up there are certain disadvantages associated with mutual funds as well for business blog. For example, whatever sum of money you choose to invest you can claim deduction only to the margin of 1, 50,000.