With markets being bullish, investing in ELSS should be your next option
Equity Linked Saving Scheme (ELSS) primarily revolve around equities and related equity products with a lock-in period of three years.
- For long term investors Equity Mutual Funds are good to invest at the point when markets are at peak
- ELSS can give you returns between 12-13%
- ELSS offers the added advantage of providing returns and offer an avenue for saving tax
Domestic markets are bullish and from past one week the indices have been touching peaks during intra-day trade. While BSE Sensex crossed 32,000-mark, NSE Nifty managed to surpass 10,000-level last week.
As the markets are at all time high, the equities investors are earning huge returns.
However, if you are planning to enter the market now and at the same time not ready to take risk, there is one option which can help you in earning equity like returns. Here, we are talking about Equity Linked Saving Scheme (ELSS).
ELSS are a form of open ended mutual funds. These schemes are fast becoming a popular choice for not just creating a savings but also double as a viable form of investments that provide a profitable return.
The funds invested in by ELSS primarily revolve around equities and related equity products and these schemes usually come with lock-in periods of three years wherein the investor cannot access his funds thereby securing the savings.
Should you invest now?
Ashwani Kumar, Senior Fund Manager, Reliance Mutual Fund, said, "The markets are at the highest level. We believe for long term investors Equity Mutual Funds are good to invest at this point in time. In India the corporate earnings are likely to catch up in next few quarters. Thus the investors can get returns superior to other alternate investments like Real Estate and Fixed income instruments."
Having similar views, Ajit Narasimhan, Category Head - Savings and Investments, BankBazaar.com said, "ELSS schemes have delivered almost 18-20% returns in the last one year. However, one should not look at near-time performance in order to invest. However, equity as an asset class will deliver inflation-beating returns."
India is among the best-performing emerging market globally and if you take a 7% growth over the next three years, it is fair to believe that equity would deliver 12-13% returns on an average for the next three years. There are times in between when you would get 18-20% returns, but if you average it for a 3-year period, it should give you anywhere between 12-13%, Narasimhan added.
The best way of investing in an ELSS is through systematic investment plans (SIP). SIPs are touted to be the wealth-generating way of investing for the long-term.
SIPs allow investors to invest small amounts every month. Most ELSS funds accept investments of Rs 500 to Rs 1,000 a month. This is how small saving can lead to higher returns in the long-term.
Also, the amounts that you invest in ELSS funds will not only lead to tax saving, but a regular investment will grow to become a large corpus after a few years.
Moreover, through an ELSS fund, you get the services of a professional fund manager at a very nominal fee. You don’t need to pick shares or sectors to invest in, the fund company’s research and analysis team does that work for you. Furthermore, with an ECS mandate, you can automate your savings plan through SIPs.
Hence, start investing in ELSS when the markets are high and earn returns on monthly basis by entering via SIPs.
Disclaimer: This story is for informational purposes only and should not be taken as an investment advice.