The equity-linked saving scheme (ELSS) is a type of mutual fund, that encourages long-term investments in equity. The main objective of investing in ELSS is long-term capital growth and tax saving. ELSS enjoys EEE benefit. The investments you make are tax-free up to Rs 1.5 Lakhs a year under section 80C. The returns and the money you get at withdrawal are tax-free. However, there are some mistakes, investors commit while investing in ELSS. In this article, we will focus on some mistakes to avoid while investing in ELSS.
Want to know more on ELSS? We at IndianMoney.com will make it easy for you. Just give us a missed call on 022 6181 6111 to explore our unique Free Advisory Service. IndianMoney.com is not a seller of any financial products. We only provide FREE financial advice / education to ensure that you are not mis-guided while buying any kind of financial products.
You May Also Watch:
Many Investors invest in ELSS only at the end of the financial year, whenever they have to submit their investment proofs to save tax. But this is not a good idea. Investing at the last minute may force you to invest a lump-sum amount. You can enjoy a lot of benefits, if you invest in ELSS at the beginning of the financial year through SIP. Investing through SIP provides benefits such as disciplined investing, rupee cost averaging and the power of compounding.
2. Trying to time the market
While investing, one should not try to time the market. If you are not an experienced investor and don't know much about the stock market, then you won't be able to recognize the exact time to invest. So, it is recommended to identify and invest in funds that are performing well. It very important to stay invested in the market during both ups and downs.
Keep your Financial Cognizance up to date with Wealth Doctor App.
3. Not understanding the category of the fund
It is very important to understand the fund category before investing. Asset management companies offer ELSS mutual funds as large, medium, and small cap funds. Risks also vary on the basis of the fund you choose. So, first analyze your risk-taking ability and identify whether you can bear risk. You can also take the help of your financial advisor to understand the fund and choose a suitable scheme.
You should not select the dividend option while investing in ELSS mutual funds. Instead, you should select the growth option. If you select the dividend option, you will lose gains from the compounding effect. In case of growth fund, your gains are reinvested and this helps in growing your money over a long period of time.
5. Redeeming immediately after lock-in period
ELSS has a lock-in period of 3 years. Some people redeem their investment soon after the end of the lock-in period. But, one must avoid doing this to gain good returns from the investment. Investors should remain invested in equity products for at least 5-7 years to get handsome returns.
6. Investing in too many funds
Investors should avoid investing in too many funds, as it becomes difficult to monitor the progress of your investment. You won't have time to dedicate to the investment. Too many funds are difficult to handle. Be Wise, Get Rich
The research team at IndianMoney.com comprises of certified and experienced professionals who share the company's vision to make every Indian financially literate by equipping every Indian with right and unbiased advice. IndianMoney.com research team provides newsletters, articles, videos and FAQs on various financial products and concepts only to help you make wise financial decisions.
Subscribe to our Youtube Channel
Hello friend! I am your personal financial advisor. By the end of this interactive session, I will help you to plan yours and your family's finances to ensure a better future.