ELSS Mutual Funds: What it means

 

ELSS Mutual Funds refer to Equity linked Mutual Funds. These are open end tax free diversified equity Mutual Funds. It is minimum made for a three year period and tax benefits are found under section 80C of the Income Tax Act. ELSS aims towards growth and dividends. The maximum investment in Equity linked Mutual Funds can be of Rupees 1.5 Lacs. Equity linked Mutual Funds almost have the same schemes as that of PPFs but for shorter time spans with an easier liquefying process. These can also be compared to short time forms of tax saving deposits that often have a 15 years lock in period.

Equity linked investments are the best for starters, and young people looking for quick money and less investment options. Investments in ELSS can happen through Mutual Fund Systematic Investment Plan. It refers to the process where the investor has to invest a particular amount of money in the same mutual fund scheme, over a fixed period of time intervals.

ELSS Mutual Funds however need certain things you should keep in mind while investing.

  • Do not start investment in ELSS late. Investment should start from ELSS.
  • Do not judge any scheme because of a short term performance if you are looking for long term benefits.
  • Along with returns, you should also take care of Risk, Scheme Stability and other factors.
  • Most investors are lured in to high dividend traps and they end up losing, so be careful.
  • ELSS is not to be used to just save your taxes. They are serious investment options.
  • Do not jump from one scheme to another after every lock in period is over. Long investment in the same scheme may give stable returns.
  • Do not invest in too many ELSS as a short term investment all at once. Invest in other options and types of Mutual Funds as well.
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