Mutual funds can be a smart move when it comes to saving taxes. If you’re looking to buy mutual funds that help you save tax and grow your wealth, Equity Linked Savings Schemes ELSS are a great option. These funds offer the dual benefit of tax savings under Section 80C of the Income Tax Act and the potential for higher returns compared to traditional tax-saving instruments. Let’s explore why ELSS funds are worth considering and how you can make the most of them.
Why choose ELSS funds for tax savings?
ELSS funds are equity mutual funds that primarily invest in stocks. They come with a lock-in period of 3 years, the shortest among all tax-saving instruments under Section 80C. This means your money isn’t locked away for too long, and you still get the benefit of equity market exposure.
What makes ELSS stand out is its potential for higher returns. Historically, equity markets in India have delivered an average return of around 12-15% annually over the long term. While past performance doesn’t guarantee future results, ELSS funds have consistently outperformed traditional tax-saving options like the Public Provident Fund PPF or National Savings Certificate NSC.
Another advantage is the flexibility they offer. Unlike fixed deposits or PPF, where you must commit a lump sum amount, you can invest in ELSS funds through SIPs. This allows you to start with as little as ₹500 per month, making it accessible for everyone.
How to choose the right ELSS fund
When you decide to buy mutual funds for tax savings, choosing the right ELSS fund is important. Here are a few factors to consider:
Past performance:
While past performance isn’t everything, it can give you an idea of how consistent the fund has been. Look for funds that have outperformed their benchmark consistently over the years.
Fund manager’s expertise:
A skilled fund manager can significantly improve a fund’s performance. Check the fund manager’s track record and experience managing equity funds.
Expense ratio:
This is the annual fee levied by the fund house for managing your money. Lower expense ratios mean that more of your money is being invested, leading to better returns over time.
Risk appetite:
ELSS funds invest in equities, which can be volatile. If you prefer stability, you might want to balance your portfolio with other options like liquid mutual funds, which are less risky.
The role of liquid mutual funds in your portfolio
While ELSS funds are significant for tax savings and wealth creation, having a balanced portfolio is also essential. This is where liquid mutual funds come into play. These funds invest in short-term debt instruments and are known for their stability and liquidity. They are ideal for parking your emergency funds or short-term savings.
The best part about liquid mutual funds is that they offer better returns than a regular savings account while keeping your money easily accessible. They also have a low-risk profile, making them a safe option for conservative investors.
How to start investing in ELSS funds
If you’re ready to buy mutual funds for tax savings, here’s a simple step-by-step guide to get started:
Set your financial goals:
Determine how much you want to invest and your goals. Do you want to save for your child’s education, your retirement, or maybe a dream vacation?
Choose the right fund:
Use online tools and resources to compare different ELSS funds. Look at their past performance, expense ratio, and fund manager’s track record.
Start with an SIP:
If you’re new to investing, starting with an SIP can help you build discipline and reduce the impact of market volatility.
Monitor your investment:
While ELSS funds have a lock-in period, it’s still important to monitor their performance. Review your portfolio regularly to make sure that it aligns with your future goals.
When it comes to investing, having the right partner can make all the difference. Ventura Securities is a trusted name in the Indian investment landscape, offering various financial products and services. With years of experience and a customer-centric approach, Ventura helps you make informed investment decisions.
Whether you’re looking to buy mutual funds for tax savings or explore other investment options, Ventura Securities provides the necessary tools and guidance. Their user-friendly platform and expert advice make it easy for beginners and seasoned investors to achieve their financial goals.
Investing in ELSS funds is a smart way to save tax while building wealth over the long term. With their potential for higher returns and the flexibility of SIPs, they are a great addition to your portfolio. And if you’re looking for stability, don’t forget to consider liquid mutual funds for your short-term needs.
The key to fruitful investing is to start early and stay consistent. If you’re ready to take the next step, explore your options and make informed decisions. If you need guidance, you can reach out to Ventura Securities.
So, why wait? Start your investment journey today and take advantage of mutual funds’ opportunities.
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