For several investors, retirement planning is usually the most ignored goal in their investment portfolio. This could be because it might appear distant, and one may not feel a pressing need to address it. However, our desire to save tax each year could be channelised to achieve two investment goals with one investment: investing for retirement and tax-saving. Enter ELSS mutual funds. Equity-linked savings scheme or ELSS is a tax-saving investment that offers dual benefits of capital appreciation and tax-saving. This article will focus on how ELSS funds can help you save tax while simultaneously funding for your retirement.

Key features of ELSS funds:

  1. At least 80% of the fund’s corpus is invested in equity and equity-related instruments
  2. There is no maximum limit to invest in ELSS funds.
  3. As an investor, ELSS funds offer a tax deduction of up to Rs.1.5 lac under Section 80C of the IT Act, 1961
  4. ELSS tax-saving funds are accompanied with a mandatory lock-in period of 3 years
  5. An investor can choose either the growth or dividend option at the time of investing.
  6. ELSS mutual funds have the potential to deliver substantial returns. However, the returns may not be guaranteed.

Why should you consider to invest in ELSS for retirement planning?

Here are some reasons why you should consider ELSS tax saving mutual funds for your retirement kitty:

  1. Stress-free investments
    The route to invest in ELSS is very simple. You can invest either through or lump sum or periodic systematic investments. You can also increase or decrease the amount over time, according to your financial position. While there is no upper limit on investments in ELSS funds, you can start by investing at least Rs.500 in these tax-saving investments. You can start by investing trivial, insignificant amounts early in your career. As your income increase over the years, you can proportionately surge your SIP amount.
  2. Diversification
    It’s not uncommon for the markets to move up and down. And as an investor, nobody wants to risk losing their entire investments to an economic slump. But, as ELSS funds usually invest in a wide variety of stocks and sectors, ELSS schemes can offer you with a well-diversified portfolio in a comfortable and cost-efficient manner.
  3. Professional management
    Just, like any other types of mutual funds, ELSS funds are managed by professionals known as fund managers. They are experts with substantial knowledge and experience in the stock market. The primary goal of fund managers is to provide investors with reasonable returns on their mutual fund investments.

While choosing an ELSS mutual fund scheme, you can compare several parameters such as risk and volatility, returns history, lock-in period, SIP option, and fund management. ELSS funds are ideal for those investors who want a taste of investing in equity without risking their investments too much. Happy investing!

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