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What Equity Linked Savings Scheme (ELSS) Mutual Funds Explained

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Amid the quest to achieve various crucial life goals through wealth creation and also reduce their income tax through tax saving instruments, many people often have to compromise on one of these two aspects when planning financial. While some financial instruments are sufficient on the wealth creation front but do not offer enough or no tax benefit, some, on the other hand, offer sufficient tax benefits but not enough returns for wealth creation, especially after taking account for inflation and the taxation of interest income. However, one tax saving instrument which adequately offers the dual benefit of wealth creation and tax saving is the ELSS (Equity Linked Savings Schemes). Let’s take an in-depth look at and understand ELSS funds and why you should invest in them.

What is ELSS?

Simply put, Equity Linked Savings Plans (ELSSs) are tax-saving equity mutual funds that invest a major proportion of their portfolio in stocks or equity-linked instruments across different industries. , market capitalizations, etc. Being equity-focused funds, ELSS comes with the same market risk as other equity funds, but their returns generally outperform not only inflation but also the various fixed income investment options in Section 80C, as well as other asset classes, with a large long-term margin.

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Main characteristics of ELSS funds

-3 year lock-in period, which is the shortest of all the investment options available under section 80C. Once the blocking period is over, the ELSS funds can be easily refunded with the refund amount credited to the linked bank account within days.

-ELSS offers the advantage of claiming tax deductions of up to Rs 1.5 lakh per fiscal year under Article 80C of the Income Tax Act.

-Possibility of investing in flat-rate mode or via the SIP channel (Systematic Investment Plan).

-No tax levied on earnings up to Rs 1 lakh during a fiscal year. However, any long-term capital gain greater than Rs 1 lakh results in a 10% LTCG tax. (Rating gains made from shares repurchased after 1 year of investment are called LTCG).

-As a category, ELSS has generated average annualized returns of approximately 60.53%, 16.28%, 15.28% and 14.41% per annum over the last 1 year, 3 year, 5 years and 7 years respectively. (According to valueresearch data from 08.09.2021).

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What to consider before investing in ELSS funds?

1. Investment horizon

Since ELSS are equity-focused mutual funds and stocks have a proven track record of higher returns with less long-term volatility, make sure you have at least an investment horizon. in the medium and long term of 5 years and more when you invest in ELSS. In addition to taking into account the mandatory three-year blocking period in ELSS funds, aim to stay invested for the long term instead of redeeming at the end of the blocking period. Keep in mind that having equity exposure in ELSS funds allows investors to mitigate market volatility by staying invested longer. Investing solely for the purpose of saving tax and paying off quickly after the lock-in period would prevent you from maximizing the potential return on equity investments that would otherwise have been generated over the long-term investment horizon.

2. Returns

When investing in ELSS funds, remember that returns are entirely dependent on the performance of the underlying securities, ie stocks. Returns shown are based on past performance, so they do not guarantee returns. It is an indication of potential returns, which would possibly depend on the performance of the fund and the market scenario. Since equities have shown much higher returns than other asset classes over the long term, it is advisable to stay invested in ELSS funds for a longer investment horizon.

In addition, be sure to periodically review your portfolio and the plans chosen. If the funds have consistently underperformed for the past few quarters, you may want to consider buying them back and switching to better performing ELSS funds to ensure wealth creation.

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3. Risk appetite analysis

Since different ELSS funds have different investment strategies, the market risk associated with their portfolios may differ between many ELSS funds. Therefore, ideally, those with a low or moderate risk appetite are advised to invest in ELSS funds with a predilection for large cap stocks, as these tend to involve a relatively high degree of risk. lesser. While those with a high risk appetite can go ahead with ELSS funds with a tendency towards mid / small cap stocks and / or multi-cap funds, as these typically involve a degree of higher risk.

Now that you have gained the basic understanding of what ELSS is and how it works, it becomes imperative to go ahead and know its benefits and how it outperforms other tax saving schemes such as ULIP, PPF, 5 year tax saving FD, SCSS, SSY, NPS etc. by a wide margin.

Benefits of ELSS and how it outperforms other tax saving investment options

1. Greater liquidity thanks to the shortest blocking period

ELSS mutual funds have the lowest locking-up period of just 3 years, compared to other tax-saving investment options, such as PPF (15 years), Tax-saver FD, ULIP and NSC (5 years each). While investment in the National Pension Scheme (NPS) remains blocked until retirement. With their investments locked in for the shortest period among its peers, ELSS offers a higher degree of liquidity to its investors in the event that they need to redeem their investments for various reasons during a three-year post-lock term.

2. Higher returns and wealth creation potential than its peers

Since ELSS primarily invests in equities and equity-related instruments, it is able to comfortably outperform its peers like ULIPs, tax-saving FDs, PPFs, etc., in terms of higher returns than long-term inflation. Additionally, despite the re-imposition of the 10% LTCG tax on earnings above Rs 1 in a fiscal year, ELSS’s after-tax returns are still significantly higher than its peers, especially on long horizons. long-term investment. over 5 years old.

3. The SIP route instills disciplined investment

Like other categories of mutual funds, ELSS funds also allow the investor to choose the flat-rate investment mode or SIP (Systematic Investment Plan). SIPs involve a periodic and automatic investment, as the amount is debited automatically on the predefined date and frequency (usually monthly). This mechanism allows SIPs to establish financial discipline by encouraging the investor to save and invest regularly. Additionally, the concept of averaging rupee costs of SIPs leads to an average of the cost at which mutual fund shares are purchased, thus negating the need to time the market even during market fluctuations.

Smart steps to follow when investing in ELSS funds

1. Don’t rush into redemption when the lock-in period ends

Many investors make the mistake of exiting / redeeming their ELSS investments as soon as their 3 year lock-up period expires. Those investors who rush into the decision to redeem at the end of the lock-in period should remember that equity mutual funds are best suited for achieving long-term goals of 5 years and more. Therefore, redeeming ELSS funds after 3 years may not leave enough time for your investment to grow and generate the expected returns. It would therefore be prudent to remain invested as long as possible, until the desired corpus has been accumulated. However, it would be prudent to redeem in the event that your program has consistently underperformed its benchmark and peers.

2. Make sure that tax savings are the main but not the only objective of the investment.

Every investor should adopt a goal-based investment strategy while investing. Even though the main reason for investing in ELSS funds is largely tax savings, investors should ensure that the goal of wealth creation needs to be considered equally, in order to achieve goals. long term such as higher education and child marriage. However, it is prudent to act diligently before investing in ELSS, ensuring that your financial goals are aligned with the investment and that you have carefully assessed the associated risk, expected returns, etc.

3. Stay invested even after retirement

Contrary to popular advice that investors should buy back their equity investments and turn to less risky alternatives such as debt funds and fixed income products after retirement, it’s best not to. This is because more often than not the fixed income products you transfer your ELSS and other equity investments to fail to beat inflation rates. This can lead to losses after tax deductions for those in higher tax brackets. Plus, if you end up living longer than your expected life expectancy, the longevity risk of missing out on your retirement corpus could worsen your financial life.

Therefore, those who invested in ELSS before their retirement should not leave them completely. Instead, whatever part of your corpus is intended to be consumed in the long term, i.e. five years or more, it should remain invested in equity funds, because stocks as a asset class have consistently beaten their peers by delivering returns above inflation. on the long term. The rest of the corpus can be redeemed and moved to less risky avenues.


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Get Rs 16 Lakh Return By Investing Rs 10,000 Per Month

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When thinking of investing money in a safe and reliable way, the first thing that often comes to mind is the use of term deposit accounts or savings accounts with your banks. However, there is an equally effective alternative. You should consider investing your money through the Post’s Savings Plan, or more specifically, the Post’s recurring deposit account. With this method, your money and the interest you earn over time is safe. It should also be noted that the potential risk is relatively negligible while providing good returns.

That said, take a look at this particular program and how you can get the most out of it in the future.

La Poste’s recurring deposit account

The post office recurring deposit account is a government guaranteed system where you can deposit small amounts in installments. It also gives you better interest rates. The advantages of this program are that the minimum amount can be as low as Rs 100 to start your investment journey and the advantage is that there is no upper limit for the investment. You can literally invest as much money as you want.

There is, however, a caveat about this. When you normally open a savings account or a fixed deposit account with a bank, they give you options for a variety of mandates. In the case of the Post system, you can open the Post Recurring Deposit Account for a fixed period of five years.

Breakdown of interest rates for recurring post office deposits

This plan is one of the most popular choices because it offers an attractive interest rate of 5.8 percent. This is the latest interest rate set by the government and entered into force on April 1, 2020. The central government sets the interest rates for its small savings plans every quarter. How it works, compound interest is calculated quarterly which makes it very effective as it helps investors generate income on a frequent basis.

To highlight the effectiveness of recurring deposit investing, consider this: if you invest Rs 10,000 every month at the current interest rate of 5.8%, then in 10 years that amount will be compounded to give you about Rs 16 lakh in returns.

What is the capture?

Sometimes things can sound too good to be true, but in this case, it’s true. The only thing you need to keep in mind is that in order to reach your goal, you need to regularly deposit money on a monthly basis. If by any chance you skip a month or miss a payment, you have to pay a one percent penalty each month. If you miss four consecutive months of payments, the account will be automatically closed. However, you can still recover the account within 2 months from the date of default, but if you miss the window, it will be closed permanently.

It should also be noted that this system allows applicants to withdraw up to 50 percent of their deposit balance one year after opening the account. In the event that the individual opts for the repayment facility on the installments paid in advance, he will have to face a limit of only six installments.

The plan also allows account holders to designate other people to receive payment in the event of the death of the account holder. This appointment process can be done at any time.

Read all the latest news, breaking news and coronavirus news here


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The BNB reveals the winners of the “Al Watani savings plan” for August 2021

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Manama, Bahrain: The National Bank of Bahrain (NBB) unveiled the five lucky winners of its Al Watani savings plan for August 2021. The draw took place at the Bank’s headquarters on September 15e, in the presence of representatives of the Ministry of Industry, Trade and Tourism and external auditors.

A total of four winners; Farah Tawfeeq AlMansoor, Abdulaziz Hasan AlSubai, Zainab Saleh Hassan and Sara Burhanudeen Mohamed, received a cash prize of USD 25,000 each, while Abdulla Abdulwahab Sultan was the lucky winner of a monthly salary of USD 50,000 to pay out over a 12-month period. The winners expressed their joy and gratitude upon receiving the news, reiterating the positive impact these awards will have on their lives, especially in the current situation.

Ahmed AlMaskati, Retail Product Manager at NBB, said: “We are delighted to celebrate the August Awards with five of our loyal customers, which shows that the more our customers deposit into their account, the more their chances of winning are high. BNB clients still have the opportunity to win even bigger prizes until the end of the current year, as we keep our promise to be closer to our clients in new and innovative ways. Customers can now also take advantage of our certificate-less savings accounts, use them for daily use, and have a chance to win one of our great cash prizes.

BNB clients can also benefit from interest payments on their savings on Express Savers and SaveWave accounts, while increasing their chances of winning one of the Al Watani awards all year round. The BNB’s Al Watani Awards have been changing the lives of clients for more than 20 years, and the National Bank intends to continue its efforts to connect with its clients by giving its loyal clients the chance to win every month.

The current year still has a lot to offer with the Al Watani Awards, as next month customers will have the chance to win the Bank’s Quarterly Prize, in addition to the year-end Dream Prize, which is expected to wrap up the awards. this year’s award in December.

-Ends-

© Press release 2021


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Roanoke Rapids Savings Bank Launches Digital Insurance Agency Through Partnership with Insuritas and NCBA

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Insurance services offered in partnership with Insuritas and Community Insurance Services, a subsidiary of the North Carolina Bankers Association (NCBA)

We are proud to be the first bank to participate in this endeavor because we believe it fits perfectly with the mission and vision of RRSB.

– Robbie Harvell, CEO of RRSB

HARTFORD, CT, USA, September 17, 2021 /EINPresswire.com/ – Roanoke Rapids Savings Bank is the first bank to partner with Insuritas, a full-service digital insurance agency platform, through ‘a joint venture with Community Insurance Services LLC, a subsidiary of the North Carolina Bankers Association (NCBA). The new insurance agency, Community Insurance Services, was launched on August 30, 2021 and is designed to offer a full line of auto, home and small business insurance products to their customers.

“The Roanoke Rapids Savings Bank (RRSB) is delighted to work with Insuritas and Community Insurance Services. We look forward to our partnership, and especially the value it adds to the relationships we have with our customers and our community. We are proud to be the first bank to participate in this endeavor because we believe it fits perfectly with the mission and vision of RRSB. Said Robbie Harvell CEO of RRSB.

The insurance agency will offer more than 40 partner carriers and offer products such as auto, home, business, pets, travel and more. “We are delighted to announce our relationship with Roanoke Rapids Savings Bank and are proud to have won the opportunity to create, launch and manage a full-service, digital insurance agency for the bank and its clients,” said the president of Insuritas. and CEO Jeffrey Chesky. “Through our unique partnership with the NCBA, the bank will now be able to provide simple and transparent access to competitive options for its clients’ insurance needs, all with a focus on providing the right coverage. at the right price at the right time.

NCBA President Peter Gwaltney noted; “Creating recurring commission income by helping clients and increasing customer portfolio share will be increasingly important to our community banks, and this innovative partnership between NCBA and Insuritas enables even our smallest community banking members. to provide a full-service insurance agency platform without the traditional capital, execution and reputational risks of buying or setting up a local agency.

About the Roanoke Rapids Savings Bank
Roanoke Rapids Savings Bank was founded in 1914 in Roanoke Rapids, North Carolina. The aim of the Bank was to provide a means of housing the community. These means have been satisfied over the years by paying a good return on the deposits of customers whose loans have been made on residential houses. This type of activity is still the predominant activity of the Bank today. However, due to deregulation, many traditional banking services have been offered since October 1988. Services such as checking accounts, consumer loans, master card loans, ATMs, online banking services offer customers Bank a one stop shop for all their personal banking needs.

About the NCBA
The North Carolina Bankers Association brings together all categories of banking institutions that best represent the interests of our rapidly changing state. Proudly serving the North Carolina banking industry since 1897, the NCBA is the professional business organization that advocates, leads and supports its vibrant member base. The Association has three subsidiaries, Centrant Community Capital, Community Bank Services (CBS) and Community Insurance Services (CIS). Centrant Community Capital provides permanent debt financing to workforce apartment and housing communities in a number of states. CBS offers insurance and benefits products, as well as other products to Association members and publishes a quarterly magazine, Carolina Banker. CIS was created to remove the barriers that will allow our community banks to provide a full range of quality assurance options to their customers. For more information, visit www.ncbankers.org.

About Insuritas
Insuritas’ mission is to connect people to the insurance products they need through a smooth and seamless shopping experience where carriers compete to provide them with the right coverage at the right price. Insuritas’ Embedded Agency as a Service platform is installed on a network of partner financial institutions serving more than 11 million clients nationwide. digitally optimized insurance offers to their depositors, all within their brand. These strategies help to strengthen their commitment to the financial well-being of their clients, while providing an essential source of non-interest income for their institution. For more information, visit www.insuritas.com.

Jeffrey Chesky
Insuritas
+1 8606531134
jchesky@insuritas.com
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