Monday, April 15, 2024
HomeEconomyNavigate Market Volatility: Thriving Through Mutual Fund Investment

Navigate Market Volatility: Thriving Through Mutual Fund Investment

The year 2024 may seem like a long way off, but it’s never too early to start planning for your financial future. As our world changes and technology continues to advance rapidly, it’s essential to plan ahead to ensure a stable and secure retirement. One way to do this is by investing in Equity-Linked Saving Schemes (ELSS) mutual funds. In this article, we will discuss the benefits of ELSS investments and why they are essential in 2024.

What are ELSS Mutual Funds?

ELSS is a type of diversified mutual fund in which the majority of the corpus is invested in equity or equity-related securities. These funds are known for providing higher returns than other tax-saving instruments such as Public Provident Funds (PPF) and National Savings Certificate (NSC). ELSS mutual funds offer tax benefits under Section 80C of the Income Tax Act. Investors can claim deductions up to INR 1.5 lakhs in a financial year by investing in ELSS mutual funds.

Why are ELSS Investments Essential in 2024?

1. Inflation is a Growing Concern

Inflation continues to be a growing concern in the Indian economy. Inflation erodes the value of money over time and impacts the purchasing power of individuals. Investing in ELSS mutual funds can help you beat inflation and secure your financial future. Inflation has fluctuated around 5-6% over the last few years but has the potential to increase in the future. ELSS funds have the potential to earn higher returns than the inflation rate, thereby helping investors maintain the purchasing power of their money.

2. Retirement Planning

Retirement planning is an essential aspect of securing our financial future. With increasing life expectancy, it becomes crucial to plan and invest in options that provide a regular source of income after retirement. An ELSS mutual fund investment can help in generating wealth for your retirement. These funds have a lock-in period of three years, ensuring discipline to invest regularly. Consider a situation where you start an SIP of INR 10,000 per month from January 2022 in an ELSS mutual fund. Assuming an average return of 12%, the corpus will grow to INR 10.7 lakhs by December 2024, and to INR 57.7 lakhs by December 2042.

3. Equity Markets Offer Higher Returns in the Long Run

ELSS mutual funds are equity mutual funds with a lock-in period of three years, making them an ideal investment option for those who want to gain exposure to the equity market. Equity markets are known to offer higher returns to investors over the long run. According to the data available from CRISIL, the average returns of ELSS mutual funds between 2011-12 to 2020-21 were 11.7%, whereas, for the equity market index, it was 10.7%. ELSS mutual funds provide an opportunity to benefit from the growth opportunities of the equity market in the long run.

4. Tax Savings

ELSS investments can provide tax benefits under Section 80C of the Income Tax Act. Investing in ELSS mutual funds up to INR 1.5 lakhs can help in reducing taxable income and thereby reducing tax liability. Taxes are an inevitable expense, and minimizing them can help in saving money that can be used for other investments or expenses.

5. SIP – A Convenient Investing Option

A Systematic Investment Plan (SIP) is a convenient investing option that allows investors to invest smaller amounts regularly in ELSS mutual funds. SIPs help in availing the benefits of rupee-cost averaging and compounding. The full form of SIP is Systematic Investment Plan, and it helps in regular investing, which may be as low as INR 500 per month. Consider an SIP in an ELSS mutual fund started in January 2022 with INR 5,000 per month. Assuming an average return of 12%, the corpus will grow to INR 5.4 lakhs by December 2024, and to INR 29 lakhs by December 2042.

Investing in ELSS Mutual Funds – A Disclaimer

Like any investment option, investing in ELSS mutual funds has its pros and cons. While ELSS mutual funds offer higher returns than other tax-saving instruments, they are subject to market risks, and past performance may not be indicative of future returns. Investors must gauge the risks and rewards of investing and choose the option that aligns with their investment goals. It’s advisable to consult a financial advisor before making any investment decisions.

Conclusion

In conclusion, 2024 is not far away, and it’s crucial to start planning for your financial future now. Investing in ELSS mutual funds can aid in generating wealth, beating inflation, and reducing tax liability. Equity markets are known to provide higher returns in the long run, and investing in ELSS funds can potentially help in achieving financial goals. Ensure that you weigh all the pros and cons of investing in ELSS mutual funds and consult with a financial advisor before making any investment decisions

RELATED ARTICLES
- Advertisment -
Google search engine

Most Popular

Recent Comments