Why Should I Choose ELSS With a Mutual Fund Advisor in Chennai?

"Where should I invest? How much risk should I take? Will I save on taxes too?"

These are common questions that every investor has. The good news is, there’s one investment option that addresses all these concerns in one go, ELSS Mutual Funds.

If you're someone looking to start your investment journey with small amounts, and want a long-term corpus? And also want to save taxes, then this is exactly what you need and a mutual fund investment planner in Chennai such as Fairmoves can help you get started with investing in ELSS.

What is an ELSS Mutual Fund?

ELSS stands for Equity Linked Savings Scheme. It’s a type of mutual fund that invests in equities and also offers tax benefits under Section 80C of the Income Tax Act.

Here’s why ELSS stands out:

• It’s an open-ended equity mutual fund.

• You can invest via a lump sum or SIP (Systematic Investment Plan).

• It comes with a lock-in period of just 3 years, which is the shortest among all tax-saving instruments.

Note: ELSS investments provide tax benefits only under the Old Tax Regime as per Section 80C of the Income Tax Act. These benefits are not available if you opt for the New Tax Regime.

Why Is ELSS a Smart Choice for Beginners?

Many beginner investors often wonder, Why ELSS? Here's why this fund makes sense, especially when you're just getting started:

1.    Tax Saving + Wealth Building

ELSS lets you claim up to ₹1.5 lakh deduction under Section 80C annually. At the same time, since it invests in equity markets, it has the potential to grow your money faster compared to traditional instruments like FDs or PPF.

Please note that the tax deduction benefit for ELSS (Equity-Linked Savings Scheme) investments, typically claimed under Section 80C of the Income Tax Act, is only applicable if you choose the Old Tax Regime for your income tax filing. If you opt for the New Tax Regime, you will not be able to claim these tax deductions on your ELSS investments.

2.    Shortest Lock-In Period

Compared to other tax-saving options like PPF (15 years) or tax-saving FDs (5 years), ELSS only locks your money for 3 years, making it a flexible option.

3.    Start Small, Grow Big

You can start investing in ELSS with a small monthly SIP of ₹500. This makes it budget-friendly and accessible for salaried individuals and first-time investors.

If you are a young professional or a salaried individual and have started investing in ELSS, you can seek the help of a mutual fund advisor in Chennai, who can offer a structured entry into equity markets without the need for large capital.

Features of ELSS Mutual Funds

Understanding the features will help you feel more confident:

• Equity Exposure: At least 65% of the portfolio is invested in equity shares.

• No Entry/Exit Load: You can invest and redeem without paying additional charges (post lock-in).

• Dual Benefit: Combines the advantage of tax saving and equity growth.

• Growth Option: Pick as per your goal, whether it's regular income or long-term corpus.

SIP vs Lump Sum, What’s Better for ELSS?

Both options have their pros:

• SIP (Systematic Investment Plan): Helps in averaging the cost during market ups and downs. Ideal for salaried investors.

• Lump Sum: Suitable if you have surplus funds and want to invest in one go, especially during a market dip.

For beginners, SIP is a more disciplined and risk-managed approach. It makes sure that you don’t wait for the “right time” to invest and builds a habit.

Who Should Invest in ELSS?

• Salaried individuals looking to save tax and invest monthly.

• New investors want exposure to equity with minimal risk.

• People with long-term goals, like retirement or children's education.

However, you should be ready to stay invested for at least 5 years to truly enjoy the benefits, even though the lock-in is only for 3 years.

Factors to Consider Before Investing in ELSS

While ELSS is beginner-friendly, consider these before investing:

1.    Your Risk Appetite

Since ELSS invests in equities, there will be market fluctuations. Are you okay with short-term volatility for long-term growth?

2.    Investment Horizon

Although ELSS has a 3-year lock-in, aim to stay invested for 5–7 years for better returns.

3.    Fund Performance

Always check the long-term performance of the fund and the fund manager’s track record.

4.    Fund Objective

Match your financial goals, retirement, education, and corpus building with the fund’s investment style and sectors.

Mistakes to Avoid While Investing in ELSS

Learning what not to do is as important as knowing what to do:

• Investing just to save tax without aligning with your goals.

• Stopping SIPs midway due to market downturns.

• Not reviewing fund performance periodically.

• Redeeming immediately after 3 years, even if your goal hasn’t matured.

Conclusion

If you’re new to investing, ELSS mutual funds are an excellent way to start. They offer the perfect combo of tax benefits, equity exposure, and wealth creation, all packed into a simple product. Unlike complicated schemes, ELSS keeps it straightforward, invests regularly, stays invested, and lets compounding do the magic.

By choosing the right fund and following a disciplined SIP approach, you can unlock long-term potential growth, meet your goals, and save on taxes every year.