Best SIP Plans to Invest

The biggest mistake newbie investors make is investing in an SIP based on previous yields. Investors need to understand, an SIP’s previous performance does not ensure consistent upward trajectory moving forward, in terms of the returns fetched.

See, every investor has a different set of liabilities and obligations, making his or her investment agenda unique.

Consequently, an SIP that suits a youngster looking to build a corpus expeditiously by adopting an ambitious compounding strategy, may not be fit for a salaried individual aiming to accumulate wealth for his post retirement needs. The Best SIP Plans are those that are in line with investors’ priorities.

Simply put, SIPs cannot be identified based on generic parameters. Unfortunately, most unsuspecting investors opt for one-size-fits-all plans, which most definitely is a step in the wrong direction and can yield disastrous results.

Choosing SIPs requires detailed scrutiny of aspects that can affect its returns, both in the long and short-term. Those successful in doing so usually end up investing in plans that are best for them, and not for the entity pushing for their purchase.

ELSS funds have a lock-in period, which means there is little an investor can do if his funds are parked in the wrong scheme, which is why when it comes to investing in ELSS plans, seeking professional assistance is the only way to go. Each investor must be isolated and diagnosed separately for obligations and liabilities before a financial solution can be tailored to their specific needs.

Herein, the first step is to prioritise. Among other things, one must be clear on their investment goal; is it simply to save money on taxes, or are they aiming for a specific volume of gains? In addition, the amount they wish to accumulate, the duration of their investment, and the estimated tax outgo must all be considered. These variables must be communicated to the professional assisting the investor in order to shortlist an ELSS plan compatible with the former's risk profile.

ELSS Mutual Funds help investors save money on taxes. However, selecting an investment option that suits them best can be challenging. Read on to figure out who should invest in ELSS funds.

People Looking to Save Tax

Everyone wants to save money on taxes, and ELSS funds are the most suitable tax-saving options. Investments made in ELSS Funds qualify for annual tax deductions of up to Rs.1,50,000. The asset class is an absolute favourite among salaried and business class investors. Also, any gains made under ELSS Funds are identified as long-term capital gains and therefore are tax-free up to a limit of Rs. 1,25,000. The gains made over and above this threshold are taxed at a mere 12.5%.

Wealth Accumulation

ELSS Funds are an ideal wealth-building tool for people who can stay invested for long. Investors with a relatively high-risk appetite and willingness to stay invested for longer periods can accumulate wealth over time. This means they can benefit from the power of compounding by allowing the investment enough time to grow.

Those Planning a Purchase

ELSS funds are an ideal stepping stone for those planning a purchase or eyeing a goal, be it short or long term, due to their tendency to generate better returns. When allowed sufficient time to grow and managed actively, the Best ELSS funds can fetch above-normal returns, helping investors achieve their long and short-term objectives, from buying a house or car purchase to retirement and child education planning. However, investors must seek professional help before investing in ELSS schemes, ensuring that the investment is monitored actively by a certified professional.

There are multiple Benefits of Investing in ELSS Mutual Funds. Listed below are some of those-

Tax Saving

One of the primary benefits of investing in ELSS mutual funds is tax saving. ELSS schemes enjoy tax benefits listed under Section 80C of the Income Tax Act. As per the governing provisions, investors can claim a tax deduction of up to Rs 1,50,000 a year by investing in ELSS schemes, saving up to Rs 46,800 a year on taxes.

Better Post-Tax Returns

Long-term capital gains made from ELSS are tax-free up to a limit of Rs. 1,25,000. Also, gains made over and above this limit are taxed at 12.5% only. In short, lower tax rates and higher returns ensure the best-possible post-tax returns.

High Returns

Inherently, ELSS investments are vulnerable to market fluctuations. However, this vulnerability can be used to the investor's advantage if the investment is given enough time to grow in the market. Over time, ELSS funds benefit from compounding laws and produce higher returns.

Multiple Investment Modes

Investors can enter ELSS schemes in one go by making a one-time lump sum investment, or they can invest in portions through regular monthly contributions via an SIP plan. This "flexibility" is what makes ELSS schemes an investor favourite.

Many features make ELSS Funds an ideal investment option for investors, be it people looking to save money on tax or those eyeing a specific goal. Let's look at some of their noteworthy features.

• ELSS Funds invest at least 80 per cent of their corpus in equity and equity-related instruments, making them a high-yielding asset class.
• ELSS mutual funds have a mandatory lock-in period of 3 years, meaning the investor cannot liquidate units from the ELSS plan until the conclusion of the lock-in period.
• ELSS funds also do not have any upper investment limit, although the minimum investment threshold tends to vary across fund houses.
• ELSS Funds qualify for tax deductions listed under Section 80 C of the Income Tax Act. Investors are eligible for a tax deduction of up to Rs. 1,50,000 on investments, saving up to Rs. 46,800 on taxes yearly.
• ELSS schemes are open-ended, meaning there is no upper limit to the time duration one can remain invested in an ELSS scheme.
• The gains made through ELSS funds are tax exempted up to Rs. 1,25,000. Gains made over and above this threshold are taxed at 12.5 per cent.

Listed below are some ELSS schemes that can be considered the "best" in the present scenario. However, we must remind investors that there are no universally compatible or beneficial ELSS schemes. Each investor's needs are different, and therefore the investments they make should be considered separately. Please get in touch with us to figure out schemes that meet your needs.

The best investment plans are those that offer consistent returns over the long term. Sometimes, however, the ELSS schemes topping the charts descend the rankings and never recover, meaning they're inconsistent performers. The fact that ELSS plans come with a 3-year lock-in period only compounds the problem, as the investor cannot salvage the money parked in the fund for the time being. So, it is safe to assume that there are other parameters besides previous yields to shortlist ELSS funds for investment.