A mutual fund is a broad investment category. Typically, the equity from investors and other stakeholders is aggregated to form a common fund in a mutual fund. This aggregate corpus is then invested in various asset classes such as stocks, bonds, money-market instruments, gold, and more.
Mutual funds can be classified as equity funds, debt funds, hybrid funds, balanced funds, or money market funds based on the proportion of their corpus invested in various assets. This is a summary of the fundamental concepts of mutual fund investing.
What is an ELSS (Equity Linked Savings Scheme)?
An ELSS is a category of a mutual fund. It is a type of equity mutual fund that owns stock at least 65% of its corpus in the financial market. Aside from this distinguishing feature, ELSS mutual funds have two other distinguishing characteristics that set them besides from traditional mutual funds.
Choosing the right ELSS fund can be challenging at times. At that juncture, comparing the different aspects of the funds may be the best option at that point. Not only that, but your financial priorities, time horizon, and risk tolerance all play a role in fund selection.
Even if you’re a first-time investor or frequently invest in mutual funds, ELSS may be a good option for you. Because, in addition to wealth creation, ELSS offers the benefit of tax savings!
Salaried Employees – As a contract employee, you may be contributing a certain amount to EPF, NPS, ULIPs, or other tax-saving investment instruments. ELSS funds, in comparison to these investments, have the prospects for incredible returns as well as a lower tax burden!
When it comes to balancing risk and return on your equity investment, ELSS can be an excellent choice. But have you ever wondered why NPSs and ULIPs are in the same category and provide the same benefit as ELSS funds? Because the National Pension Scheme (NPS) and Unit Linked Insurance Plans (ULIPs) have a longer lock-in period and lower potential returns, in addition to tax benefits and equity investments!
Whether you’re looking for a tax-efficient investment plan for yourself, these funds are an excellent choice.