- Date : 30/09/2021
- Read: 4 mins
Find out how investing in ELSS can be helpful for women.
Women have an extraordinary ability to understand market movements. Today’s women are not hesitant to take chances. In fact, women of all ages and economic and social backgrounds are now actively investing. They are steadily gaining confidence and are comfortable investing a large chunk of their income or savings. This can be seen even in women from tier-II and tier-III cities, who are increasingly moving away from conventional saving methods to equity-oriented schemes like ELSS.
Read on to know more about ELSS and how it is helping women to secure their future.
What is ELSS?
Equity Linked Saving Scheme or ELSS is a type of mutual fund that chiefly invests in equities or equity-oriented related securities. Due to the high concentration on equity, ELSS funds can deliver inflation-beating returns over time and are hence considered a great addition to any investment portfolio. ELSS funds also have an edge over other investments as they come under under Section 80C of the Income Tax Act, 1961. Thanks to its tax benefits and favourable returns, ELSS can be an excellent investment for women.
Also read: 8 Ways women can save on income tax in 2021
How can investing in ELSS benefit women?
Here are some significant reasons why women should invest in ELSS:
- It can help save tax: More and more women are now working and earning. While a steady flow of income from a job or business is a step towards financial independence, it also adds the burden of paying taxes. However, an investment in a mutual fund scheme like ELSS can help. As per the provisions of Section 80C of the IT Act, you can claim a tax deduction of up to Rs 1.5 lakh on investments made towards ELSS in a financial year. So, while your invested capital appreciates in the market, you also save money otherwise spent on taxes!
- It offers inflation-beating returns: ELSS funds have enabled many women to maximise tax savings and ensure financial security in life. Investing in ELSS primarily exposes your money to equity and equity-related instruments. Considering the high risk-return quotient associated with equities, you may be able to reach your goals sooner by investing in ELSS funds. On average, 15% of a woman’s portfolio consists of ELSS funds, as compared to only 12% of a man’s. Combined with tax savings, such a concentration has been helping women create substantial wealth for themselves.
- It offers the option to invest in SIPs: With the flexibility of investing in a Systematic Investment Plan (SIP) and in a lump sum, women can easily manage their investments with an ELSS fund. The SIP mode allows you to start with an amount as little as Rs 500 a month. This can fit into any budget without coming in the way of other goals or responsibilities. You can gradually increase your SIP amount or invest salary increments or bonuses in a lump sum. Moreover, since the contributions can be set up electronically, investing becomes even more hassle-free and smooth.
- It is managed by a professional fund manager: ELSS funds are actively managed by a fund manager. This takes away the need to spend time and effort on timing the market yourself. Women with busy schedules or investors who are starting out and have little understanding of the market can benefit from such a scheme.
- It offers a short lock-in period: Compared to other tax-saving options, ELSS funds have a shorter lock-in period of only three years. Therefore, investing in ELSS can add more liquidity and flexibility to your portfolio. It can also help in case of a financial emergency and be used for short-term goals. However, it may be advised to stay invested for the long term to see better returns. Moreover, the lock-in period ensures that you do not withdraw your funds before 3 years. This inculcates financial discipline, especially if you have the tendency to dig in into your savings.
Top 5 ELSS funds for women
There has been a positive shift in the world of investing in recent times, with many women opting for high-risk investments over traditional saving methods. They are also upping their investments during market corrections and making sound decisions at the right time to maximise their gains. In short, ELSS funds are the perfect companion for women who aim to be financially free. With tax savings and inflation-beating returns, they allow easy capital appreciation.