What are Equity Linked Savings Schemes?
Equity Linked Saving Schemes are a close-ended lock-in period of 3 years equity schemes. They offer Tax benefits and can be invested using SIP (Systematic Investment Plan) and lump sums investment options. The lock-in period is 3 years, therefore better liquidity is available. Moneymindz, India’s First Free Online Financial Advisory
What should you know about investing in ELSS?
1. Lock in period
ELSS has the shortest lock-in period, among other tax saving investment instruments, of 3 years. ELSS is a good investment option for your short-term goals. Short term goals are goals which take 3 or less than 3 years to complete. So you can fulfil your short-term goals. But if you think you may need the money in a year or two, ELSS isn’t for you as you have to wait for three years to get the money.
2. Risk factor
Investors’ money is predominantly invested in equity or equity-related securities, so the risk is higher and that’s what makes ELSS slightly riskier. But it’s a good investment option if you want to earn returns over a short period of time. A method to reduce the risk is to stay invested in ELSS for a longer time. Moneymindz, India’s First Free On call Financial Advisory
These are equity-oriented investment instruments; therefore there are no guaranteed returns. If you stay invested for a longer time, you can expect higher returns compared to other investment options. The ELSS performance doesn’t stay constant. It also depends on the performance of the fund manager who has invested your money.
4. Knowledge of how the market works
Before investing anywhere, not just ELSS, ensure you have the basic understanding of how the market functions. If you are unaware of this, you will be confused by the way the market behaves. For instance, you have to check the past performance of any fund before investing in it. You have to read about the company and find out how trustworthy or honest it is, how much you can expect from it, etc. A goal-oriented investment in ELSS is a great method to use. Smart Financial Advisor, Kuber Mindz
5. Tax benefits
Certain investment instruments like PPF, EPF, etc. are eligible for tax benefits. You can save tax on them If you want to claim the minimum tax deduction in ELSS, go through your other investments. If you have claimed tax exemption in other investment instruments, you can’t claim tax exemption in ELSS.
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