The new financial year 19-20 has begun on a tentative note, where we saw the equity markets showing some volatility with some uncertainty looming because of the impending general election results. Well election time historically has always been volatile for the markets, however, mutual fund investors who have invested with long term financial goals should not get worried by such temporary volatility.
As this is the beginning of a new FY, it may be wise for retail investors to plan out their monthly outlays for tax saving and annual financial goals. Systematic Investment Plans (SIP), have now become another word for mutual funds with retail investors, and SIP in tax saving funds will be a good start if one has not done their tax planning yet.
Equity Linked Savings Schemes (ELSS) are close ended diversified equity funds with 3-year lock in which gives investors the benefit of tax benefit under Section 80C of the income tax Act of 1961 and hence are popularly known as tax saving funds. These funds by design are long term in their construct hence not only gives the tax benefit to the investor but also helps them create wealth through the equity markets. Investing in ELSS through the SIP route promotes the monthly savings habit in an investor and also does not make this investment skewed towards the end of the year which not only puts more financial stress but also carries the risk of lumpsum investment as compared to a SIP.
Important Points before investing in ELSS:
We at L & T Mutual Fund believe that one must plan for the financial goals and start saving early in life as well as in the financial year. Good planning and efficient asset allocation will only help you to reduce stress for tax planning outlay at the end of the year. It will also help an investor to avoid adhoc investment decisions which may turn out to be detrimental as compared to doing regular investments which averages out the cost of investment. So, let this be a year of planned investments and therefore tax efficient asset allocations which will help you achieve your financial goals and dreams.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.