Mutual Funds is one of the most sought after investing options in the market right now due to its ease of invest, widely available and can be customised to ones requirements. Mutual Funds are financial products consisting of various instruments such as stocks, shares and bonds, it pools money from various investors and is maintained by a Fund Manager. One of the popular categories of Mutual Funds is ELSS – Equity Linked Saving Scheme, a diversified equity fund. The fund manager invests in stocks of different listed companies based on an in depth market research so that risk is mitigated. Below points will give an idea about ELSS. 

Features of ELSS – 

• Shortest lock in period of 3 years and after that it is like any open ended scheme.
• Tax saving benefits of up toRs1.5 lakhs in a year by investing in ELSS and hence offer a dual advantage of capital appreciation and tax savings

• Potential higher returns as they are invested in equities and can help create a good fund for retirement. Even after the lock in period ends one can continue to maintain the fund and allow it to grow.
• Hassel free and transparent investments- one can invest through Systematic Investment Plan (SIP) based on their means from as low as Rs.500 which helps build a good corpus. The detail of the fund investment is easily available and one can keep a tab on its performance.
• Instil a habit of saving through SIP on a monthly basis at a minimal invest and one can see the wealth grow. 

Who can invest in ELSS? 

• Salaried individuals – with a monthly SIP of as less as Rs.500 it will not be a burden on an individual who is looking to invest but doesn’t have too much means.

• High Risk takers who are ready to take the gamble and are looking to diversify their portfolio.

• First time investors can also look at investing in ELSS because of the ease and transparency.

Things to consider before investing – 

• Performance of the fund in the past has to be ascertained to see its growth against the benchmark and also how it compares with its competitors. If a fund is steadily doing better than its competitors and the benchmark then the returns will be higher.

• Method of investment has to be determined based on availability of funds at disposal, one can either invest a lump sum or look at SIP. 

• Mitigate the risk by investing through SIP as the market is unpredictable and buying it via SIP at different value will reduce to the risk to some extent.

Types of ELSS – 

• Growth Fund – The investor does not receive any payouts from time to time and one will receive the gains only at the time of redemption. This helps appreciate the total NAV and multiples the profits.

• Dividend Option – The investor can either receives payout from time to time in the form of dividends when there is an excessive profit or chose to re-invest it in the fund.

To conclude one can say ELSS is dual benefit scheme where one can grow their wealth and save tax with easy investment options. But one still has to bear in mind the volatility of the market and take the risk when investing.