What are the major areas of difference between ELSS and equity funds?
In the equity funds, the fund managers usually invest in equity shares as well as other investment instruments. The main aim of these mutual funds is to create high returns for the investors and that is why they invest in the shares of companies of various sizes. However, equity markets are volatile. This means that there is tremendous fluctuation in their prices and that too in a short period. This also means that there is a tremendous amount of risk associated with such an investment. So, if you wish to invest in the equity funds and its market, you have to be prepared to take this risk as well.
The value of patience and perseverance in such investment
However, if you persevere and are patient you could reap handsome rewards in the bargain. This is especially true when you invest through a top-tier fund house such as Quantum. This is why you must be mentally prepared to invest in this market for the long haul. This is also why it is such a good option for certain people. For example, people who are planning to retire after 20 years should invest in these and build up a good corpus for their retirement. However, if you have any urgent expenses in mind it is better to stay away from these.
The term ELSS stands for equity-linked savings scheme. This is also a kind of equity investment but the main reason why people invest in ELSS funds is to save taxes. So, there you have a key difference between ELSS and equity fund. As per Section 80C of the Indian Income Tax Act you can get tax benefits till the region of 1.5 lakh rupees in a year. Apart from helping you save taxes it also has a unique feature of a lock-in period of 3 years. This helps you create the habit of saving for a longer period. This is what you should ideally have as an investor.
Among all tax-saving investments, ELSS happens to be the most popular. In fact, they have become quite popular nowadays. Much of this is because of their shorter lock-in periods compared to other such forms of investment. They are linked to the market and this is why they provide much better returns as well. They also offer greater flexibility to investors. If you want you can also invest in these funds through SIPs (systematic investment plans).
