There are so many common things in growing trees and investing. If you want to pluck ripe fruit from that tree, you need to plant a tree at the right time and in the right soil and wait for the time.
You have to keep an eye on that tree to keep it from harm. Likewise, you have to invest your money at the right time and in the right funds so that you can have enough money to meet your different financial goals.
ELSS (Equity-Linked Saving Scheme) is one of the best ways that help you to grow your money regularly like a tree. Below are a few important tips to consider before you invest in ELSS Funds.
Pick the Right ELSS Funds
If you are investing in ELSS funds, you should make sure the fund you are choosing consist of stocks and meet your risk toleration capacity. It is considered that the large-cap stocks likely performed well compared to mid-cap and small-cap stocks.
So if you are investing blindly might harm you and you can lose money like if the tree is planted in the wrong soil and the wrong way it may not get you the best fruit. So be careful while selecting funds for your investment purpose.
Focus on Goals
Just like you desire fruits so you have planted a tree, likewise, you need to focus on the different investment goals. For example consider, your child is eight years old and you want him/her to pursue an MBA in e-business in America at the age of twenty-two, so you need to plan for the investment likewise.
If expansion is expected at five percent and you want a return of ten percent for the course which costs ₹15 Lakhs, you will need to invest ₹8163 per month at a current time in a SIP (Systematic Investment Plans) or ₹7.82 Lakhs approx. to get ₹29 Lakhs which will fund your child’s education expenses. At the same time, you can plan for other goals like a dream house, dream car, and so on by using an investment calculator easily available on the financial website.
NAV (Net Asset Value) is just a number
It is said that the best fruit does not always grow on a tree that is tall. In the same way, it does not matter NAV (Net Asset Value) of the MF (Mutual Funds) reflects a fund’s accomplishment or not. Net asset value is the only way to determine the number of mutual funds units you can buy at a certain investment amount.
For example, if you invest ₹1000 in a mutual fund whose NAV is ₹10, you will get 100 units. Similarly, you will get 10 units if the NAV is ₹100 per unit. Here only the number of units will be different but the return value will be the same. If you take the above example into consideration you earn 10% of returns so now your investment will grow to ₹1100 regardless of the NAV at the time of investment.
You May Like to Read: Investments and Tax on LTCG All You Need to Know
Stay Invested for Years
One thing is important here in mutual funds like ELSS you need to stay invested for years in order to grow your money. Your investment gets compounded when you stay invested for years and get benefits from cost averaging.
However, there is a lock-in period of three years for ELSS investment but it is advisable to stay invested after the locking period and redeem the investment amount in SWP (Systematic Withdrawal Plan). If you are using this way of withdrawing your invested amount then the capital amount will be stable and compounded over the years.
Keep Track of Fund
Just like trees need to be taken care of in order to grow and give desired fruits, you will need to track your investment and keep adjusting the investment accordingly so that you can meet your different investment goals.
By keeping an eye on the fund you will come to the fund you are invested in working or not and adjust them by the time. Once the lock-in period is over you can re-allocate your amount to other ELSS investment funds.