6 Reasons Why Women Should invest in ELSS Fund

(Article dated 29^th Jan)

Irrespective of your gender, money is undeniably an important factor in almost everyone's life. And, if you are someone who wants to increase your chances of improving your existing financial state, you may need to consider on investing. Investing in mutual funds can be one way for individuals to get a step closer to their ultimate financial goal. 

Money is the vehicle that powers most dreams and aspirations. For women, money is independence. Women understand the importance of financial independence far better than men. Having the authority and sources to buy whatever you want without asking anyone can be quite liberating. Today's women are far more independent and confident enough to take their own financial investment decisions.

 Also, with modern investment tools like mutual funds gaining traction among all age groups, there isn't a reason why women should be shying away from giving their money a chance to grow. Also, tax is a major concern for both working men and women. So an investment in a mutual fund scheme like ELSS will not only help women in saving some taxes, but can also result in capital appreciation.

Today we are going to discuss why women should invest in ELSS Fund. But before we get there, let's get some basics cleared.

What are mutual funds?

As per SEBIs definition# , "Mutual fund is a mechanism for pooling the resources by issuing units to the investors and investing funds in securities in accordance with objectives as disclosed in offer document."

Basically, what mutual funds do is that they collect money from investors sharing common investment objective, and invest that pool of fund in various instruments like equity, debt, bonds, government securities, etc. Mutual fund investors are allotted units depending on the mutual fund's assets under management, the NAV of the fund may fluctuate.

What is ELSS?

ELSS is the only mutual fund scheme which comes under Section 80C of Income Tax Act, 1961. Working women who wish to save tax and also wishes to invest in the equity market having the potential of growth and capital appreciation over long term, you may consider investing in ELSS.

Equity Linked Saving Scheme or ELSS is a mutual fund scheme that comes with a mandatory lock-in period of three years. With ELSS, you may seek capital appreciation through equity investments along with tax-saving benefits. ELSS primarily invests in equity and equity related instruments, and investors should bear in mind that returns from the equity market are never guaranteed.

Six reasons for women to invest in ELSS Fund

1. ELSS has the potential to offer capital appreciation: ELSS invests largely in equity and equity related instruments. Hence, it has the potential to offer some returns and hence, can be treated as any other equity scheme. Who knows, if staying invested for the long run, ELSS might be able to help investors in reaching closer to their financial goal.
2. ELSS can help you save some tax: As stated earlier, as per Section 80C, investors can invest up to Rs. 1.5 lakh per fiscal year and bring down their taxable income. However, there is no upper limit for ELSS investments and women investors, if they wish, can invest more than Rs. 1.5 lakh per year. Although they cannot claim tax benefits exceeding the Rs. 1.5 lakh limit.
3. ELSS investments allow SIP: Women investors, if they wish to, can start investing in ELSS with an amount as low as Rs. 500 per month through SIP. Systematic Investment Plan or SIP is a systematic approach where investors can instruct their bank to deduct a predetermined amount on a predetermined date every month and electronically direct it towards their ELSS investment. When an investor chooses to pay his/her investment amount through SIP, a fixed amount is debited from their debit account and is invested in the scheme which they’ve chosen.
4. ELSS comes with a short lock-in period of 3 years: ELSS probably has the lowest lock-in period among tax saving instruments. This makes ELSS as the tax saving instrument which shall allow you to enjoy tax benefits with a lock-in as low as three years. But this also means that you cannot redeem your ELSS for at least three years.
5. ELSS are professionally managed: ELSS is an open ended scheme which is actively managed. This means that even if you are new to the whole investment scenario, you can still invest in ELSS as the fund is usually managed by professional and experienced fund managers.
6. ELSS has expense ratio equivalent to any other equity schemes: Most of the ELSS funds do not hold any entry or exit load. To add to that, ELSS comes with a mandatory lock-in period of three years. It offers an expense ratio equivalent to equity mutual fund schemes.

Let's hope that the above knowledge about ELSS and mutual funds helps women investors in taking an informed investment decision, or they can consider using an ELSS app to explore options and make smart investment choices.

*As per the present tax laws, eligible investors (individual/HUF) are entitled to deduction from their gross income of the amount invested in Equity Linked Saving Scheme (ELSS) up to Rs.1.5 lakhs (along with other prescribed investments) under section 80C of the Income Tax Act, 1961. Tax savings of Rs. 46,800 mentioned above is calculated for the highest income tax slab. Investors are advised to consult his/her own Tax Consultant with respect to the specific amount of tax and other implications arising out of his/her participation in ELSS

#Source -https://www.sebi.gov.in/sebi_data/docfiles/20616_t.html

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