Apart from being a tax saving tool, ELSS is also a great financial instrument to build wealth in the long term. However, due to their preference as a tax-saving tool, most investors tend to put such investments on hold till the last minute.
Arijit Sen, SEBI registered investment advisor and co-founder of merrymind.in said, “Last minute investment in ELSS to avail tax deduction is a sign of financial indiscipline. In a way, it’s going to disrupt your monthly cash flow.”
“Investing in ELSS does not mean that you are only saving tax. It is a way to meet your financial goals. Since financial targets cannot be met by chance, planning has to be done accordingly.”
For instance, Mirae is one of the best funds in the asset tax saver category. Now, by investing ₹1.5 lakh as on March 31, 2021, you would have saved taxes under section 80C.
But, if you had invested the same money as on April 1, 2020, when the NAV of the fund was ₹13.28, then the fund would have grown ₹2.87 lakh as on March 31, 2021 (NAV was ₹25.42).
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So apart from saving tax, you could also earn returns up to ₹1.37 lakhs.
“Market movements are out of our control. Lump sum investing fails to tide over the tide of market volatility. Spreading your investments over 12 months will have the potential to substantially reduce market volatility over time.”
So because of this advice if you have spread your investment over a period of 12 months, ie ₹12,500 per month, so your investment will increase to Rs 2.05 lakh as on April 1, 2020.
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There will be 3 advantages of investing money through SIP: Saving of taxes, wealth creation and since the investment is spread over 12 months, it does not pinch the pocket of the investor.
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