Elss Mutual Funds: Your Guide To Tax-Saving And Wealth Creation

mutual fund

ELSS mutual funds have become quite popular in recent years, and for good reason. They offer a dual benefit of tax-saving and wealth creation, making them a great investment choice for individuals who want to save on taxes and build their wealth simultaneously.

 

Equity-linked saving schemes (ELSS) are mutual funds that invest primarily in equity and equity-related securities. These funds offer tax benefits under section 80C of the Income Tax Act, and they provide the potential for higher returns as compared to other tax-saving investment options. HDFC Mutual Fund’s ELSS scheme has consistently generated higher returns over the long term, making it an attractive option for investors. Investing in ELSS funds is a simple and hassle-free process that can be done through various online investment platforms. By investing in ELSS funds, individuals can create wealth over the long term while saving on taxes.

 

what is mutual fund

A mutual fund is a type of investment vehicle that pools money from multiple investors and uses that capital to purchase a diversified portfolio of stocks, bonds, or other securities. It’s managed by professional fund managers who make investment decisions on behalf of the investors. Mutual funds offer individuals an opportunity to invest in a diverse range of assets without needing to directly manage each investment themselves.

 

When you invest in a mutual fund, you’re essentially buying shares in the fund. The value of these shares, known as the net asset value (NAV), fluctuates based on the performance of the underlying securities held by the fund. Investors can buy or sell mutual fund shares at the NAV price, which is calculated at the end of each trading day.

 

Mutual funds come in various types and categories, catering to different investment goals and risk profiles. Some funds focus on stocks, seeking capital appreciation through equity investments, while others invest in bonds for more stable income generation. There are also hybrid funds that blend both stocks and bonds, as well as specialized funds that target specific industries or sectors.

 

What are ELSS Funds?

 

Equity Linked Saving Schemes (ELSS) are mutual funds that primarily invest in equity and equity-related securities. ELSS funds are diversified across sectors, which makes them less risky as compared to investing in individual stocks. An additional advantage of investing in ELSS funds is that they offer tax benefits under Section 80C of the Income Tax Act. Investing in ELSS funds allows individuals to reduce their taxable income by up to Rs. 1.5 lakh for the financial year.

 

Why Invest in ELSS Funds?

 

ELSS funds offer a higher potential for returns as compared to other tax-saving investment options, such as National Savings Certificate (NSC), Public Provident Fund (PPF), and Fixed Deposits (FDs). Over the long term, equity investments have been able to generate higher returns as compared to other asset classes. According to data from Value Research, HDFC Mutual Fund’s ELSS scheme has generated returns of 18.92% in the past five years, which is significantly higher than the returns generated by NSC, PPF, and FDs.

 

Moreover, ELSS funds have a lock-in period of three years, which means that the invested amount cannot be withdrawn before three years from the date of investment. This lock-in period helps individuals inculcate the habit of long-term investing and disciplined savings, which can help them create wealth over the long term.

 

How to Invest in ELSS Funds?

 

Investing in ELSS funds is a simple and hassle-free process. Individuals can invest in ELSS funds through their demat account or through online investment platforms. HDFC Mutual Fund, for instance, allows individuals to invest in ELSS funds through their website, mobile app, and other online investment platforms.

 

Investors need to submit KYC documents, including PAN card, Aadhaar card, bank account details, and other relevant documents to invest in ELSS funds. Once the KYC process is completed, investors can make a lump-sum investment or opt for SIP (Systematic Investment Plan), which allows them to invest a fixed amount at regular intervals.

 

Conclusion

 

ELSS funds are a great investment option for individuals who want to save on taxes and create wealth over the long term. Investing in ELSS funds allows individuals to not only save on taxes but also generate higher returns as compared to other tax-saving investments. HDFC Mutual Fund’s ELSS scheme is one such fund that has consistently delivered higher returns over the long term. With its simplified investment process and hassle-free online investment options, investing in HDFC Mutual Fund’s ELSS scheme has become a seamless experience for investors.

 

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