Managing investments successfully throughout the pandemic- Your guide

 From checking your mutual fund NAV in India to tracking investments made in equity mutual funds or debt funds, there are several aspects towards successfully managing your investments during a nationwide pandemic. The spread of the COVID-19 pandemic has led to a total lockdown throughout the country. All companies excepting entities in essential services have employees majorly working out of home while mutual fund firms are also functioning with minimal manpower at offices. The Association of Mutual Funds has also notified the Securities and Exchange Board of India (SEBI) sometime earlier that daily operations may be impacted at some levels. Yet, mutual fund houses are also striving to ensure seamless facilities for customers amidst these challenging times.

You can consider rebalancing your portfolio. Check out newer fund options including overseas mutual funds or international mutual funds if you wish to hedge against future expenses like global travel or higher education of children. Allocating a smaller portion of the portfolio towards international investments may help you enhance the quality of your portfolio while enabling you to benefit from positive market developments in fast-growing countries which have relatively shaken off the pandemic. However, consult financial advisors before making any such move as per experts. You can also try hybrid funds which may help in optimizing risks greatly. If you are investing in mutual funds via SIPs and do not wish to stretch a lot in the present situation, then you should know that everything will steadily get back on track in the near future.

People desirous of redemptions, new investments, switches or changes related to the account or profile, should keep a tab on the operational component of mutual funds. If digital platforms have been used, a majority of activities may be executed without any hindrances like before. However, people still conducting transactions physically may have to tackle a few temporary issues. Delays may be there in publishing the mutual fund NAV in India. Several fund houses have intimated investors with a view towards emailing transactions to them for processing as well. Many mutual fund houses have come out with mobile apps and internal digital platforms for investments and other online services.

You should look out for all such facilities offered by your mutual fund company. Investors may contact distributors for advice on proper digital platforms for meeting requirements of services and transactions. They may also initiate mutual fund transactions on investors’ behalf post approval of transactions via web-links through e-mails and SMS-es. The markets offer ample scope for investors to deploy funds in a suitably diversified portfolio of highly liquid, fundamentally solid and reputed entities.

Debt redemptions are comparatively more for fixed-income funds as per industry experts and managers. Year-end considerations may be stimulating these developments. You should also highlight liquidity above all else. Investors, if they have lower liquidity in their portfolios, should consider redeeming funds while building the necessary liquidity, irrespective of market circumstances. At the same time, if investors have ample cash in hand, they may consider fresh investment allocations while preparing to tackle some more volatility in the near future. You may consider sticking to your long-term investments unless your require funds urgently as per industry experts.

Tax saving gets a lot easier with this plan

 

The growing popularity of equity linked saving scheme in India or ELSS, as the acronym goes, indicates its considerable benefits for regular investors. ELSS is a great choice for investments since it gives rather generous tax benefits. ELSS tax saving funds are funds linked to equities in the market which deploy a major portion of the fund corpus towards buying equities or equity-linked instruments. They are known as tax saving ELSS mutual funds since they offer tax exemptions from your annual taxable income based upon deductions under Section 80C of the Income Tax Act.

Keeping ELSS in portfolio will be a wise move since these funds deploy investments throughout multiple geographies and cover several companies varying form small cap entities to mid cap and even large cap entities. This enables diversification of your portfolio over a period of time. The schemes come with a mandatory 3-year lock-in period and you can only redeem your units post the expiration of this duration. The funds have risks since they are exposed towards equity markets and their innate volatilities although they have the possibility of garnering superior returns over the long haul. You can lower risks of volatility in the market by deploying SIPs (systematic investment plans) for investing in ELSS schemes. You can always invest a lump sum amount in ELSS schemes but this will be riskier. Most investors prefer investing smaller amounts every month or periodically by way of SIPs while it gets them good tax benefits in turn.

Ensure that your ELSS plan is diversified throughout various business sectors and market capitalization levels. There are two types of funds, namely Growth Funds where long-term creation of wealth is the objective and investors realize the full value at the time when they redeem their units and there is also the Dividend Payout option where you either get dividends which are tax-free or reinvest dividends wholly as new investments.

An equity linked saving scheme in India is a better option since you get deductions up to Rs. 1.5 lakh upon investments in the same under Section 80C. In spite of the new tax rules, i.e. taxes upon LTCG (long-term capital gains) from ELSS options, the funds are one of the best options for saving on taxes. They have the potential of superior long-term returns while covering your entire spectrum of Section 80C deductions simultaneously. They offer the highest returns after taxes as compared to all other Section 80C choices including ULIPs and PPF (Public Provident Funds). Historically, these plans have ensured close to 12% over the last decade and even higher.

The lock-in period is also low compared to EPF, PPF and NSC which have minimum 5-15 years as their lock-in periods. You can also easily shift to another fund if you are dissatisfied with the performance of your current ELSS fund. Long-term capital gains are also exempted till Rs. 1 lakh and the dividends that you get will be tax-free in your hands. You can keep investing after the expiration of the three-year lock-in period. It is thus important to bust wrongful ELSS myths about saving taxes and start off with a plan that is more suited towards your specific needs and requirements.

 

 

ELSS investments- A brief guide

ELSS stands for equity linked savings scheme and it is one of the foremost investment options under which you can save taxes under Section 80C of the Income Tax Act. If you are wondering how to invest in ELSS, you should know that these schemes are quite similar to other open-ended funds in the equity space although they have lock-in periods of 3 years. However, the minimum amount for investment can be as low as Rs. 500 every month without any upper threshold or limit for investing. You can either invest via a lump sum amount or choose SIPs (systematic investment plans).

Keep in mind that each and every installment you make accordingly will have a lock-in period of 3 years. Along with long-term wealth generation, you can garner attractive returns that may surpass inflation as well. Investing through SIPs will help you benefit from rupee cost averaging along with compounding, enabling better protection against market volatility and long-term capital appreciation. Choose ELSS funds on the basis of several parameters like consistent performance in the long term, rate of returns (adjusted for risks), reputation of the mutual fund house/firm and the terms and conditions.

Why ELSS funds are beneficial for your portfolio

Now that you know what is ELSS and know more about investing in these schemes, there are various benefits in store.

·        Lower Lock-In Period- ELSS investments come with 3-year lock-in periods which are considerably lower in comparison to other tax-saving investments like tax-saver FDs which have 5-year lock-in periods, PPF which has a 15-year lock-in period and NSC which has a lock-in period of 6 years.

·        Tax Savings- ELSS tax saving mutual funds will help you save considerably on your tax outgo. Investments are eligible for deductions up to Rs. 1,50,000 under Section 80C. Tax efficiency makes these schemes great options for investments.

·        Building Wealth- ELSS schemes will help you get inflation-beating returns over the long haul, helping you amass wealth considerably over a span of 3-5 years or more.

·        Professional Management- Unlike many other investment options, ELSS schemes will be managed professionally by market experts. They will naturally aim at ensuring the highest possible gains/returns for their clients.

·        Flexible SIPs- For paying smaller amounts every month instead of a lump sum amount and benefiting from cost averaging and compounding alike, you can choose SIPs (systematic investment plans) for amounts as low as Rs. 500 a month.

Of course, you should take a closer look at the market performance of the ELSS scheme that you have chosen along with its returns (adjusted for risk) over a sustained time period. Make sure that you shortlist a reputed mutual fund house as well. These schemes will help you earn good returns while helping you save on taxes as well.

You can flexibly continue with the investment after 3 years or withdraw your money as per your convenience or needs. These are some of the reasons why you should choose to invest in ELSS plans.