Everyone has wonderful dreams of making a lot of money. Success for us is materialistic and measured with a lot of ups and downs depending on the way we shape our wealth. This world looks up to people who have made their wealth by chasing their dreams or even if they have simply inherited it from their family.
Wealth speaks for itself and makes people bow their hand in front of you, how much ever rich or well off you must be though you should not forget how you made that wealth in the first place. You don’t get rich overnight, even worse you hardly ever get rich by simply chasing money or doing a job that you somehow wish to get through with during the day.
Wealth is only created where there is passion and love for your work, coupled with hard work. There are no substitutes to it. There are people, systems, machines and computers in place to make life easier.
But they are just there to supplement your hard work not make it completely free from your intervention.
These factors also apply for your financial growth. Investments are just one part of the big picture and the entire picture. Our constant pursuit to make something off whatever we have invested, to watch it grow and flourish is what will make all the difference.
The difference of us being just another investor getting normal returns to a person who would stand a chance to strike gold. When i say plan your investments i mean, do not shy away from getting professional help. Do not have any second thoughts before taking a second opinion or even a third sometimes.
Our suggestion is when you do invest, always divide your investments into 3 categories.
- High Risk Investments
- Long term or low risk investments &
- Tax saving mutual funds
Today we shall be discussing ELSS or equity linked savings scheme which ends up saving tax for everyone who invests it. It doesn’t go without saying that it does come with its own pros and cons, rest assured lets eventually discuss Pros and Cons of ELSS Funds as well.
Let’s begin with describing, what ELSS actually is?
ELSS (Equity Linked Savings Scheme)
The full form of ELSS makes it self-explanatory that it is a equity based mutual fund. Basically a tax saving mutual fund that helps you avail tax deductions are known as ELSS. These are saving alternatives under section 80C. These are meant to be mutual funds that people invest in throughout the year, but some people consider ELSS as a last moment decision when they do not have sufficient investments to showcase for the existing financial year.
Lets straight away dive into the Pros and Cons of ELSS
A minimum lock-in of just 3 years which is considerably less in comparison to other mutual funds
it is very difficult to decide which fund to make your investment in
Can earn returns that are substantially higher than the rate at which we are investing
A ton of documentation is required at first
Earnings once you done with the lock in period are 100% tax free
There are no guaranteed returns, as this is an equity based mutual fund which makes it subject to market returns, hence it is not possible to confirm whether or not you will get any returns
The power of compounding will help you earn in multiples of your principal amount
Most mutual funds won’t accept investments from people living in Canada and the US
There is no maximum limit to invest
There is also no premature withdrawals that are allowed
So above listed are the pros and cons or advantages and disadvantages of ELSS
but always keep in mind that ELSS is the only mutual fund that holds the potential to generate massive returns.
You can calculate your ELSS returns by means of ELSS investment calculator
You must be wondering what is ELSS SIP? Well ELSS as you know is equity linked savings scheme and SIP is systematic investment plan. Both go hand in hand for a very good reason.
SIP saves you the stress of investing once in a year or quarterly. A lump sum amount is not the ideal way of going about your investments as it might be very dear to your wallet. SIP or systematic investment plans are the equivalent of EMI’s, the major difference being instead of you paying for something that you have already spent on, you are investing in something that can end up becoming something of a very substantial amount.
SIP does not attract any kind of additional taxation or has any drawbacks. It rather opens up opportunities for people who make a humble living and yet wish to make the most of investment opportunities at hand.
Hence not only mutual fund companies but also various middle men and agencies recommend investing via SIP. If you wish to know any more about SIP related investments you can connect with us or any of our representatives. We will make sure they clear your doubts related to SIP and mutual funds.
Who is ELSS for?
ELSS is for those who are just starting out in their careers. Who are making a humble living and wish to go for mutual funds that are not high on risk. ELSS is also for the people who are getting a lot other opportunities to invest in high risk investments and need some form of investment that will help them save on tax.
ELSS is the kind of investment that does not have any age gap, you can start as young as you want. ELSS is also for the kind of people who do not believe in putting all eggs in one basket. As in invest in the top 3 or 4 high performing ELSS and get the best kind of returns over time.
What are the advantages of ELSS over PPF?
ELSS and PPF both are tax savings option issued by the government of India. The major difference in between the 2 is the lock in period. For PPF it being 15 years and for ELSS it being just a 3 years. So yes ELSS is the better option when it comes to investments as compared to PPF as in the case of emergencies you may displace the amount for ELSS a lot quicker than PPF. Have a look online for ELSS vs ppf and you will get a better idea about it.
What are my Options while Investing in ELSS?
There is growth option - where the holder will not get any benefits in the form of dividends. The holder will only receive the benefits at the end of the tenure which will help appreciate your NAV and thus multiply your profits. Also this will be completely dependent on the market conditions. So it may work in your favor or maybe completely bad for you but it is possible that the profits might by great.
Dividend option - The option where the investor gets timely benefit of dividends as compared to a wholesome amount at the end is called as the dividend option . The best part is any dividend that the investor receives is not liable for taxation by the government and will receive the entire amount.
Dividend Reinvestments option - The final option that an ELSS policy holder will receive is a dividend reinvestment option where the policy holder has the option of giving back the dividends received in order to add to the NAV. It is a good option in the case that the market is performing very well during the 3 year tenure of the Lock in period. You will gain substantially from it and eventually when you will withdraw your amount in hand will be quite considerable as well.
How to invest in ELSS?
The ELSS investment procedure is very simple, your KYC (its mandatory) and PAN card details in place. One can later approach asset management companies. There are many ways to go about ELSS, you can do all the investment related procedures by yourself, or you can appoint a middle man or agent.
The final option being you can have a third person invest on your behalf. The risk in the last option being when the third person will invest on your behalf he will only pick funds that will provide him high rate of returns now as compared to any time later in the future. He will try to gain maximum profits out of the dividends that he will receive.
One can also invest ELSS online, just look out for how to invest in ELSS online. You can easily register yourself at any online mutual fund manager website such as ours and get going with your ELSS related investments right away. You will not have to pay any additional charges and you are not subject to any terms and conditions.
All and all investing in ELSS is a very smart way to grow your money, ELSS brings to the table a very fine blend of growth, tax savings and stability (Subject to market risk). But the key here is getting the right kind of advice and guidance. When given the right direction you will be able to make out the top performing ELSS funds and will be able to categorize your investments based on the same.
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