Dec 29, 2016 3 min read

5 Reasons to Invest in ELSS to Generate Wealth

Learn why Equity Linked Savings Schemes (ELSS) are a great way to generate high returns from the invested money.

Equity Linked Savings Schemes are one the best options available in the present time to save income on taxes. However, most of the people still choose to opt for Fixed deposits (FDs) or Public Provident Fund(PPF) as they are not much aware of the benefits provided by the former and wish to stay on the safer side when it comes to their invested money. In this blog, we have made sure to remove all your doubts regarding ELSS and the reasons why they are preferably a better option.

Here are the top five factors which can influence you to invest in ELSS without a second thought. Read further to know more:

  • ELSS offer great returns regardless of inflation:- Since ELSS are equity-oriented investments; they are likely to invest approximately 80% of the assets in equity and equity-oriented instruments which is probably the highest among all the tax-saving investment options. Volatility is short-lived, and so ELSS are meant to garner long-term benefits which are greater than the rate of inflation.
  • ELSS are not bound by maturity date:- ELSS come with the biggest advantage that they have no maturity period. The investors are free to continue investing in these schemes even after the lock-in period has expired. Moreover, ELSS works on principles of the power of compounding interest which is said to generate significant returns because of which the more you invest over time, the more returns you get in the future. So, even if you have stopped investing in this scheme for some time, you still would be eligible to garner the share of profit on your investment.
  • ELSS offer diversification in funds:- While investing in ELSS mutual funds, you have the option to choose the funds in which you wish to park your money. Moreover, you can even switch to some other fund if you feel that you are not getting the expected returns. Not only this, the fund builds its portfolio itself by investing in companies across different market capitalisation and sectors.
  • Investments in ELSS can be made through SIPs or Lumpsum:- Systematic Investment Plan(SIP) is a great way to invest a fixed amount every month. With SIP, it is not necessary to invest a huge amount every month in fulfilling your 80C requirement. Instead, you can choose to deposit a small amount every month and gain tax benefits at the end of the financial year. Rupee-cost averaging is another advantage of ELSS which makes them a better choice.
  • ELSS have the lowest lock-in period among tax saving investments:- The lock-in period for tax saving investments is generally long. For instance, the lock-in period of PPF is 15 years, while for the Employee Provident Fund (EPF) and National Pension System (NPS) you need to stay invested till you retire. Other investment options like FDs have a lock-in of at least five years. In comparison to all of these, ELSS funds have a lock-in period of just three years which makes it easier for the investors to take out their deposited cash within a short period itself.

ELSS invest in the equities which are exposed to high risks, but you are relieved about the high returns as well. We hope that the reasons mentioned above might have convinced you about the investing in the ELSS category.

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