ELSS funds are tax saving mutual funds that allow you to get better returns and also save taxes at the same time. If you are ready to hold your investment for a three year lock-in period in order to get the maximum returns then this can be a great option. In order to get the best ELSS funds, one has to hold his investment for atleast three years in order to qualify for it. If you are planning to invest in a portfolio of Equity Linked Instruments then you can enjoy higher returns. It also provides you with a more easy way of SIPs if you are not able to invest a lump sum amount at once. In this method, you need to opt for a SIP plan and the specified money will be deducted from your account every month for a specific period of time.
If you are not sure which scheme to opt for then here’s how you can choose the best ELSS funds to diversify your portfolio:
- Investment Range: The lower lock-in period offered by ELSS is a great advantage as other funds ask you to hold your investment for a longer period of time. However, investors should consider holding it for more than three years in order to get the most from appreciation in ELSS investments. In a few cases, holding an investment for three years might not be enough for the market. When it comes to the mid- and small-cap segments, sometimes, it takes more than three years to generate returns by reversing a downward trend. If you consider a systematic investment plan (SIP) into ELSS then the market volatility can work in your favour as a SIP aids in averaging out the cost.
- Tenure: If you want to select the best ELSS funds then you should be ready to hold your investment for at least five to seven years in order to get the maximum returns. You can enjoy benefits such as rupee cost averaging and compounding if you are performing the ELSS investment via SIP. Hence, you can get significant returns after long-term investing.
- Evaluating the performance: You should always evaluate the performance of an ELSS fund on the basis of its long term performance, instead of short term performance. There are cases where the fund is not in a healthy condition during the short run and tends to improve drastically over the long run. You should select the best ELSS funds where your investment will be able to consistently function for at least 5 years in order to get good returns.
- Keep it clear and simple: If you doing over-diversification of your portfolio then it can seriously hamper the growth because it would not be handy enough to manage. In addition to that, it is advisable that you should invest in too many ELSSs and only invest in the best ELSS funds because of the difficulty in managing all the investments in the future.
ELSS is a great way through which one can grow his or her money over time without putting much effort and also save taxes simultaneously. Finding the best ELSS funds is not rocket science and one can easily get some by following the tips mentioned above. Before selecting any ELSS fund, make sure to check the portfolio of the scheme in order to make sure that the scheme is well diversified across market caps. Before opting for any scheme you should ensure that you comply with the Know Your Customer (KYC) norm. There are various companies through which you can invest in ELSS funds. Moreover, you can invest in best ELSS funds with Money.Mobikwik.