CEO Speak

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:

  • Investing for Long term financial goal should be the primary objective of the investor and the tax benefit should serve as an add on benefit.
  • Investing regularly takes care of the monthly mode of savings discipline and hence once started can continue for many years which will help in wealth creation.
  • Dividend option may not be the best option if your investment objective is long term, hence growth option helps in generating more value for the investor unless one is in need of regular income
  • Choose to continue beyond three years even if the lock in period is over as at the end of the day the fund is typically a diversified equity fund and one can reap the benefits of the equity markets by staying invested for a longer period of time

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.

Disclaimer – This document is for general information only and does not have regard to specific investment objectives, financial situation and the particular needs of any specific person who may receive this information. Investments in mutual funds and secondary markets inherently involve risks and recipient should consult their legal, tax and financial advisors before investing.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.