Know Why ELSS Funds Are Worth the Risk |
Posted: March 28, 2018 |
You must have heard many a time people telling that ELSS funds are very risky. Yes, they are undoubtedly as they make investments in the high-risk associated companies having great potential to generate exceptional returns during the upward market. But when the market goes down, even the best ELSS funds suffer value erosion of their portfolio. Still, these equity-linked savings schemes are worth buying and holding for so many reasons. Do you want to know the benefits that they provide? Let’s explain you in detail right here. Equity Performs the Best Over Long Term One of the biggest reasons of investing in the ELSS mutual funds is the high-yielding returns offered by the equity investments. Over a period of five to ten years, equity outperforms all the fixed income instruments and generate exceptional profits. Various tax-saving instruments apart from equity-linked savings scheme which include PPF (Public Provident Fund), FD (Fixed Deposit), NPS (National Pension Scheme), etc., offer returns in the range of 7 to 8 percent, while the ELSS funds provide equity returns falling in the range of 12 to 15 percent. This way, these funds just not fulfil the need of tax savings, but also aim at developing the wealth over a long-term. Bad Phases Become Greater Opportunities Whenever the market turns down, the bad phase for the fixed income instruments arises. The reason being is that they have investments in the bonds and money market securities which are majorly dependent on the economy. Yes, we know that the equity investments are also dependent on the economy itself, but during a temporary downturn when the stocks of the companies become cheap, there rises a better opportunity for the investors to make the best buy of ELSS at less prices. This way, with a reasonable investment, one aims to ensure a strong financial future. Once the market comes back to its normal position or raises higher, such investments become quite favourable and aim at value generation. Greater Flexibility Among the various other tax-saving investments, the ELSS funds come with higher degree of flexibility in terms of lock-in period. They have a lock-in of just three years which is quite feasible if compared with other instruments. Apart from this, the ELSS also provides the feasibility in terms of stopping the investments if the fund does not perform well. Although there is a lock-in period, you have the option to stop your investments any time if you find them non-favourable or non-performing during your investment tenure. Liquidity As read above that the ELSS mutual funds have a lock-in period of just three years, you find the benefit of liquidity, i.e., easy cash convertibility once the lock-in is over. You can withdraw your invested capital whenever needed after the completion of the three-year tenure. This way, you can easily overcome contingencies by redeeming your monies put in the ELSS plans. Accordingly, if you invest in the equity-linked savings scheme, you not just save on taxes, but also lead towards building wealth in an organised way. The equity investments provide the best opportunities of capital appreciation in the ELSS funds and hence it is worth taking certain risk in them. If you wish to plan your taxes in the best possible manner, then you must begin investing in the ELSS mutual funds by availing our services. We will let you opt for the best mutual funds as per your requirements and help you achieve your goals successfully.
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