Which ELSS schemes should you consider?
When you select an ELSS scheme, check the performance record of the scheme and also the pedigree of the Asset Management Company (AMC) which manages the scheme. One can find detailed information about ELSS schemes on portals such as Value Research and Morningstar. Below is a table listing some of the top rated ELSS schemes as per Value research as on March 08, 2016:
However, rather than investing blindly as per the suggestions on these online portals, you should treat these only as a starting point for your own research. Also remember the cardinal rule that past performance may not be sustained in future. If you are investing a considerable amount in an ELSS scheme (say Rs. 1 lakh), it is advisable to split it between atleast two schemes to reduce the fund manager risk.
How to invest & make the most out of your ELSS
Once you have shortlisted the scheme(s) in which you wish to invest, you need to complete your Know Your Customer (KYC) verification. As per a recent update by the regulatory body SEBI, if you have an Aadhar number, you can even invest upto Rs. 50,000 without undergoing KYC verification. For doing KYC, you can visit the investor service centre of the AMC and along with the application for the scheme, you can fill up the KYC form as well and submit it over the counter. If you are already KYC compliant, you can invest online from the comfort of your home/office on the website of the AMC.
If you are investing without the help of an agent, do consider opting for the “direct plan” as it will give you marginally better returns as compared to regular plan, given the lower expenses in such plans. Instead of choosing the “dividend” option, you can also go for the “growth” option.
After the 3-year lock in period is over, it is best not be in a rush to withdraw the money, since the equity markets are volatile in the short term. However, by having a minimum 10-year horizon, you can do well to stay put in the scheme and reap good returns in the long term.
ELSS is one of the best investment options especially for young families to meet the twin goals of tax benefit and long term wealth creation. A small one-time effort for KYC and the right scheme selection can yield good rewards in terms of good long term returns.
While credit cards come with a host of benefits, they must be used carefully, and never in these situations!