Have you ever thought what’s so great about dal chawal? They fill your stomach. No matter how much junk food you eat, the satisfaction you get from them is incomparable. And in the long run, they turn out to be the healthiest meal. ELSS funds are like dal chawal. They give you the satisfaction of saving tax, give great returns in the long run and continue building wealth. Historically, ELSS has performed better than PPF, Fixed deposits and other tax saving instruments. With a 3 year lock in period, you can keep shifting your funds to better performing categories. But, you need to be a little more careful and not make the below mistakes:
Don’t wait till the year end
The problem with waiting till the year end to invest and save tax is you will end up investing a lump sum amount. You never know how markets will be performing at that time and you will be forced to invest at the wrong time. Invest through SIP to ensure you average out your unit cost through ups and downs of the market. So if you are planning on investing Rs.1,50,000, divide it into 12 and start an SIP for 12,500 per month.
No cap. No clap.
In the market where people invest in mid cap, large cap or mixed funds, ELSS doesn’t mention its market cap orientation. So, it’s important to know how the returns are being generated by scanning of their portfolio.
Wait for it
We can’t emphasize enough on the fact that you should never withdraw money if your funds suddenly start underperforming. Many funds underperform in the first year and make a strong comeback in 2-3 years. So, stay invested for a long time before you decide to withdraw.
Don’t stick to one
If you invested in a super-performer ELSS, there is no guarantee it would remain a super-performer in 2-3 years. So, take a fresh look every year at your portfolio and keep increasing your basket by investing in other ELSS funds.
If dal chawal made wrong can give you an upset stomach, ELSS gone wrong can give you an upset stomach too!
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*Mutual fund investments are subject to market risks, read all scheme related documents carefully.