What is a Mutual Fund? – It is a kind of financial vehicle which works on pooling money from small investors and capitalize on securities, bonds, stocks, market tools of money, etc. The investments are done in these funds are eyed by money supervisors who work on increasing the capital and the returns for the funds invested.
The mutual funds have expense ratios of it and sometimes they have commissions involved which can shake the returns and the rewards. There are numerous forms of mutual funds involved and are professionally managed. The mutual funds and its kinds are focused on the portfolios, returns which they seek out of it.
Is ELSS funds a part of mutual funds?
Mutual funds have different kinds which money market funds, regional funds, etc. Some other kinds of mutual funds comprise smart-beta funds, funds of funds, etc. People can choose from these sorts of types and can invest their money in it. but before investing, studying the market risks is crucial.
ELSS funds are a subcategory of equity funds which comes under mutual funds. ELSS funds also known as the equity-linked saving scheme is a way of getting benefits related to tax. The people investing their money in ELSS funds will be able to exempt from taxes. The scheme works under the section of 80C of income tax act 1961. Under these funds, one will be able to get tax benefits starting from INR 46,000 up to INR 1.5 lakh. High returns are assured at minimum risks. Also, ELSS funds have a lock-in period of three years.
How to invest in ELSS funds?
It can be a little tricky to choose from the list of ELSS options. One needs to have correct and complete knowledge about it before investing money. The risks are minimal but they are subjected to change. One can decide by following the ELSS calculator or fund manager.
Here are some steps which can help in deciding how to invest in ELSS funds:
- Firstly, investors need to make an investment choice. Either they can go for SIPs or lump sums.
- Then decide how much money is to be invested as a SIP or lumpsum.
- To invest in ELSS funds, the lock-in period is also essential to choose. It can 36 months which is three years or can go for five years.
- The last step involves checking returns.
The ELSS funds also require a lot of KYC documentation. The documentation includes:
- There is a need of passport size photograph.
- The ELSS provider requires its first payment via cheque.
- Proof of address requires any one of these options: driver’s license, voter ID, ration card, pan card, aadhaar card, passport, utility bill.
- There is also a need proof of identity which can passport, pan card, aadhaar card, driver’s license, and voter ID.
There are also several other options available for those who do not want to take investment risks. They can go for PPF or NSC. But in such cases, the returns are lower as compared to ELSS funds.
