Equity mutual fund inflows dropped by 42% in July as the ELSS category inflows dropped by 48%- What should you do?

Equity mutual fund inflows dropped by 42%, and ELSS by 48% in July.

Equity mutual fund inflows dropped

The year 2022 has been volatile for the stock markets. There has been uncertainty in the markets because of the Russia-Ukraine war, high inflation, increase in interest rates globally, etc. All these factors have meant that the investors have been jittery to invest in the markets. But, the mutual fund inflows had been steady till now. The grit shown by the retail investors is amazing. The inflows had been steady in mutual funds and stocks. 

But in July, the equity mutual fund inflows dropped by 42% and ELSS by 48%. The equity mutual fund inflows in July are Rs 8898.25 crores compared to Rs 15,497.76 crores in June. The ELSS fund inflows have dropped from Rs 640.06 crores in June to Rs 327.85 crores. ELSS funds are the primary choice for 80C investments because of the low lock-in period of 3 years and the superior returns over the long term. But should you invest in ELSS funds to save tax? Let’s find out!

Related: Best liquid mutual funds to invest in India in 2022

Why ELSS funds are a good bet?

The factors for the drop in ELSS inflows are not because underperformance of the mutual funds but because of the volatility in the world markets. China-Taiwan tensions are further spooking the markets. As per the experts, if you want to invest long-term, ELSS funds are always a good choice because of the superior returns given by equities. Also, ELSS funds are Flexi cap funds and invest as per the fund manager’s view of the markets across various sizes of companies from SmallCap to LargeCap.

Some of the unique benefits of ELSS funds are:-

  • Tax exemption under 80C up to a limit of Rs 1,50,000 per year.
  • Lowest lock-in of 3 years across all 80C investments. 
  • Being flexicap, the ELSS funds have returned 17.29% till 31 July 2022 compared to 15.19% by LargeCap funds. 

As the ELSS funds invest in equities, you can make long-term investments in equities, and you can check any statistic to know that equities outperform the other asset classes in the long-term. And if you think outperformance of 4-5% is not that great for the risk, we suggest you choose SIP calculators to understand the compounding effect. In the long term, even a slight outperformance will become big in absolute numbers because of the compounding effect. 

Related: Best debt mutual funds to invest in India

ELSS funds are a good investment choice if you want to invest long-term. You can save tax as well using section 80C. This ensures that you not only save but also compound your money to create long-term wealth. Also, the ELSS funds are flexicap and invest across the different sizes of companies to generate superior returns based on the fund manager's analysis. Evaluate Different types of mutual funds and invest in schemes that fit your investment goals. 

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Disclaimer: This article is intended for general information purposes only and should not be construed as investment or legal advice. You should separately obtain independent advice when making decisions in these areas.

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