Marriage is more than just a euphoric journey. It is the end of bachelorhood and the beginning of an exciting phase in a couple’s life, which brings its own share of responsibilities as well. This includes financial responsibilities that need to be shared by both spouses. The wedding cost itself leaves several individuals with a financial burden, and if any loans were taken, they need to be repaid with time. At this important stage, one thing newlyweds should consider is investing (in case they haven’t done yet).
Saving a certain portion of their monthly income and investing in financial tools as per their risk appetite and the financial goal is something young couples should get on to immediately. That way, they get more time in their hands for saving. Remember that you are going to need more money in the future than you need now. Hence, young couples should aim at seeking long term capital gains by investing in modern investment tools like mutual funds.
Mutual funds are money funds collected from investors who share a common investment objective. This pool of funds raised from investors is invested on their behalf across the Indian economic sector. This investment is spread across various money market instruments like equity, debt, government bonds, corporate securities, etc. Mutual funds are categorized according to their distinct attributes like investment objective, risk profile, investment strategy, etc. The reason mutual funds have gained momentum among both new and seasoned investors is that they have a proven track record of giving some head turning returns as compared to traditional investment tools like bank fixed deposits (FDs), PPF, etc.
Equity Linked Saving Scheme or ELSS is one such mutual fund scheme that holds the potential to give investors with decent returns over the long term and also has tax benefit. If you, too, wish to save some money to lead a happily ever after and want to find out more on ELSS as a mutual fund tool in general, continue reading:
A little bit more on ELSS
ELSS is an open ended equity tax saving scheme which comes with a lock in period of three years. One good thing about ELSS is that it heavily invests in equity and equity related instruments, thus offering investors with high risk/rewards ratio. But before getting any further, bear in mind that ELSS is an equity linked scheme which is subject to market risk, and it is because of this that returns from this scheme are never guaranteed.
So if you a newly married couple with moderately high risk appetite and have a long term investment horizon, and most importantly, the willingness to spend less and save more so that you can have financial sustainability in future, here is why you should consider investing in ELSS:
• ELSS is a tax saving scheme: Under Section 80C of the Indian Income Tax Act, 1961, ELSS is the only mutual fund scheme where taxpayers an invest up to Rs. 1,50,000/- and claim for deduction of the same. ELSS doesn’t only bring down your overall taxable income, but it also gives you an opportunity to earn some decent returns in the long run. If you and your better half both are taxpaying citizens you can together invest up to Rs. 3 lakhs and claim tax deductions for the same. And if she / he lack the knowledge of mutual funds, you can always manage their portfolio while they continue to invest regularly
• ELSS comes with a statutory lock in: Three years lock in, which means you cannot redeem or withdraw your ELSS mutual fund units for at least three years. In case the scheme is giving you decent returns, you may continue remaining invested in ELSS even after three years. This way, your investments stand a chance to beat market inflation and provide you with long term capital returns.
• ELSS is suitable for long term investment: Just like a married couple’s journey sweetens like a marmalade with time, ELSS investments tend to give sweeter and much better returns if remained invested over a more extended period. ELSS are equity related investments, and historically, equity investments have churned better results for investors who have to hold on to their investments for at least five to ten years.
• ELSS may help you to invest systematically: Being young investors can get a tad tiring at times, and to make your life simpler, ELSS has the option of SIP. Systematic Investment Plan or SIP is a systematic approach where one can invest a fixed amount in ELSS in a simple and hassle free manner. All an investor needs to do is instruct their bank, and every month on a predetermined date, a fixed amount is debited from their bank account and transferred to your ELSS fund. This way, you continue to remain invested in ELSS from the comfort of your fingertips and also stand a chance of benefiting from the power of compounding.
• You can either opt for growth or dividend option: ELSS funds are generally available for investors in two options – growth and dividend. If this ELSS investment is one of your primary sources of income, then you should opt for the dividend option. In dividend option, offers a payout for investors in the form of dividends / bonuses. Investors receive dividends when the scheme performs in the market. It is up to the fund manager to decide when and how much dividends to distribute. The other option is a growth option where the profits made by the ELSS fund are reinvested in the fund, which in the long run, might increase the NAV or net asset value of the fund. This, in turn, will increase the value of your ELSS fund units and is ideal for investors having a long term investment objective.
So if you want to remain financially secure and also secure your spouse’s future, ELSS can be the way to go. ELSS funds offer transparency, something that is required for a healthy marriage as well. We hope that while making an investment decision, you give ELSS a thought.