What is ELSS and its benefits

What is ELSS and its benefits
ELSS-Equity linked savings scheme.It is a type of diversified equity mutual fund scheme.Investing in ELSS mutual funds gives you double benefits of tax deduction and capital appreciation.Section 80C of the income tax act eligible for tax exemptions lock period is 3 years.

Why should you invest in ELSS?

When planned efficiently,investing in ELSS helps you to save your money.ELSS funds are tax free.No tax on interest,principal amount or maturity amount.
When it comes to withdrawals,it is also free since hold period is more than 1 year.It means no taxes on capital gains.
3 plans you can select as per your preference
  • Growth plan
  • Dividend plan
  • Dividend reinvestment plan

How to select a Fund?

In market there are plenty of funds,it will be good if you select according to your needs.Do not forget to compare mutual funds before buying.

Diversification

Diversifying in the same domain of securities is ideal.for a long period of time,it proves beneficial. If one sector is not performing well,still diversification would allow your funds best results.

Inflation

Money invested today is for future use.Over the time inflation spreads and starts flying high.In that time returns will be low.

Patience

Value of shares you invested will fall and rise.so,mentally prepared to face fluctuations.

Age

Youngers can invest plenty of time in stocks because they have lot of time.Their investment in stock funds fetch return over a long period.

Risk

While choosing funds,keep in mind how much risk has to be there.Do not loose comfort zone.If you are closer to retirement better to decrease the risk factor.

Conclusion:
As an investor,you have a plenty of funds to choose from.Apart from providing the flexibility to formula investment plans based on the individual goals,it is beneficial in the terms of professional management and diversification.