{"id":14690,"date":"2022-03-24T18:00:55","date_gmt":"2022-03-24T12:30:55","guid":{"rendered":"https:\/\/www.fintoo.in\/blog\/?p=14690"},"modified":"2022-03-24T18:00:57","modified_gmt":"2022-03-24T12:30:57","slug":"how-to-choose-the-right-elss-scheme","status":"publish","type":"post","link":"https:\/\/blog.fintoo.in\/blog\/how-to-choose-the-right-elss-scheme\/","title":{"rendered":"How To Choose The Right ELSS Scheme For Investment?"},"content":{"rendered":"\n

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Investing and saving is undoubtedly the best way to minimize your tax liability. However, if you wish to get long-term wealth creation benefits along with saving tax, then investing is definitely the right option for you. And investing in Equity Linked Saving Scheme i.e. ELSS is one of the best ways to save tax as well as achieve your long-term wealth creation goals.<\/p>\n\n\n\n

As they say, investing without information will never help you achieve your goals, let\u2019s start your journey towards investing in ELSS, saving tax, and creating wealth in the long run by getting an overview of ELSS.<\/p>\n\n\n\n

Overview Of Equity-Linked Saving Scheme i.e. ELSS:<\/strong><\/p>\n\n\n\n

Equity Linked Saving Scheme is basically a tax-saving mutual fund that invests at least 80% of its assets in equity and equity-related instruments. ELSS has a three-year lock-in period and it is qualified under Section 80C which helps you get a significant amount of tax deduction every year.<\/p>\n\n\n\n

Along with helping you to save tax, ELSS\u2019 investment in equity and equity-related instruments also gives you a better chance to achieve your wealth creation goals in the long run.<\/p>\n\n\n\n

Also Read: 7 Questions To Ask Before You Make Investments<\/a><\/p>\n\n\n\n

Benefits Of Investing In ELSS:<\/strong><\/p>\n\n\n\n

One of the prime reasons that make ELSS the right choice for investors falling in the higher tax brackets is that the long-term capital gains up to Rs 1 lakh earned by investing ELSS are tax-free.<\/p>\n\n\n\n

If you fall under the highest tax bracket, investing Rs 1.5 lakh per year in ELSS can help you approximately save up to Rs. 45,000 per year.<\/p>\n\n\n\n

Another significant benefit that ELSS offers you is that you do not even need to invest a lump sum amount. You can start investing in ELSS using SIP of as low as Rs 500 per month.<\/p>\n\n\n\n

Above all, ELSS has the potential to give you inflation-beating and unbelievable returns using the power of compounding, i.e. earning interest on the principal amount as well as earning interest on interest.<\/p>\n\n\n\n

While investing in ELSS may seem extremely simple, if you do not have the required expertise and experience, choosing the right ELSS scheme may become a difficult task for you.<\/p>\n\n\n\n

Just as choosing the right ELSS scheme may enable you to save tax and achieve your long-term financial goals, choosing the wrong ELSS scheme may lead you to even lose your principal amount along with a golden opportunity to achieve your goals.<\/p>\n\n\n\n

Therefore, here\u2019s How You Can Pick The Right ELSS Fund:<\/strong><\/p>\n\n\n\n

As ELSS schemes are divided into various categories like large-cap, mid-cap, and small-cap stocks, knowing your risk profile i.e. the ideal amount of risk that you can take, will help you to choose the right ELSS Fund that completely aligns with your goals.<\/p>\n\n\n\n

For example, if you are an investor with an aggressive risk profile, you can select an ELSS scheme with a higher mid-cap and small-cap component. But, if you have a conservative risk profile, you can opt for an ELSS scheme that majorly invests in large-cap stocks.<\/p>\n\n\n\n

It is always recommended to check the investment style of the ELSS fund before selecting any ELSS fund and investing your money. For example, ELSS funds offer you different investment styles like growth, blend, or value which you can select as per requirement and goal.<\/p>\n\n\n\n

ELSS fund offering a \u2018Value Focus\u2019, invests in stocks of companies that are currently trading below their fundamentals, but are expected to rise in the future based on their potential.<\/p>\n\n\n\n

Moreover, ELSS also gives you an option to choose from a concentrated or diversified strategy wherein if you choose a concentrated strategy, the fund will invest in a maximum of 30 stocks. And if you select the diversified strategy, the fund will invest in approx. 60-65 stocks.<\/p>\n\n\n\n

If you have an aggressive risk profile, you may choose to invest in ELSS using the concentrated strategy. However, if you have a conservative risk profile, going with a diversified strategy is a better option for you.<\/p>\n\n\n\n

Overall, you must always pick an ELSS fund, which consistently outperforms the benchmark and its peers. You must also check the track record of the fund house and the fund manager along with the related expense ratio as the saving on expense ratio will help you increase the overall amount of your returns on maturity.<\/p>\n\n\n\n

Now that you know the best way to select an ELSS fund for investment, let\u2019s make things a little easier for you by sharing these Expert Recommended ELSS Funds Based On Past Performance;<\/p>\n\n\n\n

\u00b7\u00a0 \u00a0 \u00a0 Mirae Asset Tax Saver Fund – Regular Plan-Growth<\/p>\n\n\n\n

\u00b7         Quant Tax Plan-Growth<\/p>\n\n\n\n

\u00b7         Canara Robeco Equity Tax Saver – Regular Plan-Growth<\/p>\n\n\n\n

\u00b7         Axis Long Term Equity Fund – Regular Plan-Growth<\/p>\n\n\n\n