Here's Why ELSS Investment is Better Than PPF & NSC
ELSS Mutual Funds (Equity Linked Savings Scheme) are a type of mutual fund that offers dual benefits of tax savings and capital appreciation. It has become a popular investment option for many investors because it offers higher returns than other traditional investment instruments such as Public Provident Fund (PPF) and National Savings Certificate (NSC).
A major benefit of ELSS mutual funds is the flexibility they offer. Unlike PPF, which has a lock-in period of 15 years, ELSS allows investors to redeem their investments after three years. This makes it an ideal investment option for those who are looking for short-term capital gains. An ELSS investment also offers the option of systematic investment plans (SIPs), allowing investors to spread out their investments over a period of time. This helps to reduce the risk associated with investing in equities and also allows investors to save more regularly.
ELSS Mutual Funds offer higher returns than PPF and NSC. An ELSS investment is linked to the stock markets, which means investors can benefit from the appreciation in stock prices. This can lead to higher capital appreciation in the long term. On the other hand, PPF and NSC offer fixed returns, which are not as attractive as the returns offered by ELSS. Although an ELSS investment is risky because it invests into stocks and therefore fluctuates with the ups and downs of the stock market, however if one invests in a disciplined manner and does not try to time the market or panic when markets fall, the risks of ELSS Mutual Funds get mitigated over time.
An ELSS investment can also be linked to a long-term financial goal such as your retirement or your young child's education , enabling you to meet two objectives at once. In this way, ELSS Mutual Funds can be an important aspect of your goal based financial plan. The 3 year forced lock in period of an ELSS investment actually helps enforce investment discipline and increase your chances of achieving your long term goals!
Finally, ELSS also has lower investment limits. The minimum amount that can be invested in ELSS is Rs.500 per month, compared to PPF and NSC, which require a minimum investment amount of Rs.500 per year. This makes ELSS a more attractive option for investors who do not have a large investment corpus. The lower limits enable investors to start small, understand risks, and gradually build up the size of their contributions as they become more comfortable with it.
Overall, ELSS is a better investment option than PPF and NSC because it offers higher returns, greater flexibility, and lower investment limits. It is also a great option for tax savings, as investors can avail tax deductions of up to Rs.1.5 Lakhs under Section 80C of the Income Tax Act, 1961. For these reasons, ELSS is a preferred investment option for many investors.