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October 24, 2022
Top 10 ELSS mutual funds in India.
As per SEBI regulations, an ELSS fund has to invest a minimum of 80% of its assets in equity and equity-related instruments.
It is a savings scheme that comes with tax benefits. An individual can claim a tax rebate of an amount up to Rs. 1.50 lakh and save up to Rs. 46,800/- in a financial year.
Advantages:
- Tax Deduction: Any investor investing in an ELSS fund can claim the tax benefit of an amount up to Rs. 1.5 Lakh under Section 80C of the Income Tax Act and save up to Rs. 46,800/- a year.
- Shortest Lock-in Period: Only the ELSS fund is the scheme that comes with the shortest lock-in period when compared to other tax savings options available.
- Higher Returns: ELSS is the only scheme among other options available that have delivered higher returns.
The habit of Savings: An individual can develop the habit of savings by investing in these funds through SIP (Systematic Investment Plan) with as low as Rs. 500.
Table of content
- Top 10 ELSS mutual funds
- 1. Quant Tax Plan Direct Option Growth Plan
- 2. Bank of India Tax Advantage Fund Direct Plan-Growth
- 3. IDFC Tax Advantage (ELSS) Fund Direct Plan-Growth
- 4. Canara Robeco Equity Taxsaver Fund Direct Plan Growth Option
- 5. Mirae Asset Tax Saver Fund Direct Plan-Growth
- 6. Union Long-Term Equity Fund Direct Plan Growth Option
- 7. Mahindra Manulife ELSS Kar Bachat Yojana Direct Plan-Growth
- 8. DSP Tax Saver Fund Direct Plan-Growth
- 9. PGIM India ELSS Tax Saver Fund Direct Plan-Growth
- 10. UTI Long-Term Equity Fund Growth Option Direct
- What are the features of ELSS Funds?
- What are the advantages of investing in ELSS Funds?
- Whom the funds are suited for?
- FAQs
Top 10 ELSS mutual funds
| S.No. | Fund Name | 3-Yr Annualized Performance |
| 1 | Quant Tax Plan Direct Option Growth Plan | 36.22 % |
| 2 | Bank of India Tax Advantage Fund Direct Plan-Growth | 25.13 % |
| 3 | IDFC Tax Advantage (ELSS) Fund Direct Plan-Growth | 22.18 % |
| 4 | Canara Robeco Equity Taxsaver Fund Direct Plan Growth Option | 21.59 % |
| 5 | Mirae Asset Taxsaver Fund Direct Plan-Growth | 20.94 % |
| 6 | Union Long Term Equity Fund Direct Plan Growth Option | 19.99 % |
| 7 | Mahindra Manulife ELSS kar Bachat Yojana Direct Plan-Growth | 19.91 % |
| 8 | DSP Tax Saver Fund Direct Plan-Growth | 19.61 % |
| 9 | PGIM India ELSS Tax Saver Fund Direct Plan-Growth | 19.32 % |
| 10 | UTI Long Term Equity Fund Growth Option Direct | 18.87 % |
Source: Morningstar
Read more: Top 10 large cap mutual funds to invest in India
1. Quant Tax Plan Direct Option Growth Plan
Fund analysis:
The fund’s objective is to generate Capital Appreciation by investing predominantly in a well-diversified portfolio of Equity Shares with growth potential. The risk grade is high and the return grade is high.
The fund has a beta of 0.99 which means that the fund movement is very much relative to the market movement. The fund has a high risk (measured by standard deviation) than the category average.
| Pros | Cons |
| Well-diversified portfolio.Tax benefit. | Highly volatile. |
2. Bank of India Tax Advantage Fund Direct Plan-Growth
Fund analysis:
The fund has outperformed the category average over the long-term period. The risk grade is below average and whereas the return grade is high.
The fund has invested majorly in large-cap growth companies with 83.14% of its assets. The fund has low risk (measured by standard deviation) than the category average.
| Pros | Cons |
| Major holding is in Bluechip companies. Tax benefit. | Fund has underperformed the category average in 1-Yr trailing returns. |
3. IDFC Tax Advantage (ELSS) Fund Direct Plan-Growth
Fund analysis:
The fund is a consistent performer and has been rated 4-star by Morningstar. The risk grade is high, and the return grade is high.
The fund has a beta of 1.16 indicating an aggressive approach toward the stock selection. Along with investing in large-cap companies, the fund has exposure to mid-cap (19.32%) & small-cap (13.60%) companies. The fund has a high risk (measured by standard deviation) than the category average.
| Pros | Cons |
| Fund has outperformed the category average when the market was rising. Tax benefit. | Fund has underperformed the category average when the market was falling. |
4. Canara Robeco Equity Taxsaver Fund Direct Plan Growth Option
Fund analysis:
The fund has given consistent performance over the period. The risk grade is below average, and the return grade is high.
The fund flows growth style of investing and the majority of holding is in large-cap companies. The fund holds a well-diversified portfolio.
The fund has invested across market capitalization and sectors. The fund has low risk (measured by standard deviation) than the category average.
| Pros | Cons |
| Fund has outperformed the category average when the market was falling. Tax benefit. | Fund has underperformed the category average when the market was rising. |
5. Mirae Asset Tax Saver Fund Direct Plan-Growth
Fund analysis:
The fund is one of the top-performing funds in its category. It has outperformed the category average over the long-term period. The fund is rated 5-star by Morningstar. The risk grade is average, and the return grade is high.
The fund follows a blended style of investing which indicates that the fund is holding both value and growth stock in the portfolio.
The fund has good assets under the management of Rs. 11,494.59 crore, which shows the reliability of investors. The fund has a high risk (measured by standard deviation) than the category average.
| Pros | Cons |
| Fund has outperformed the category average when the market was falling. Tax benefit. | Assets Under Management are high. |
6. Union Long-Term Equity Fund Direct Plan Growth Option
Fund analysis:
The fund has outperformed the category average over the long term. The risk grade is average, and the return grade is high.
The fund has a low beta of 0.95 indicating that the movement of the fund is less relative to the market movement. The fund has invested 85.27% in large-cap companies and the rest is in mid-cap (13.13%) & small-cap (1.60%) companies.
The fund has invested across sectors. The fund has low risk (measured by standard deviation) than the category average.
| Pros | Cons |
| Well-diversified.Tax benefit. | The fund has a high expense ratio. |
Read more: Top 10 mid-cap mutual funds in India
7. Mahindra Manulife ELSS Kar Bachat Yojana Direct Plan-Growth
Fund analysis:
The fund has given stable returns over the different trailing time periods. The risk grade is average, and the return grade is average
The fund has a well-diversified portfolio of 49 holdings spread across sectors. The fund has majorly growth stocks in its portfolio. The fund has low risk (measured by standard deviation) than the category average.
| Pros | Cons |
| Fund has outperformed the category average when the market was rising. Tax benefit. | Low Assets Under Management. |
8. DSP Tax Saver Fund Direct Plan-Growth
Fund Analysis:
The fund’s objective is to generate medium to long-term capital appreciation from a diversified portfolio that is substantially constituted of equity and equity-related securities of corporates and to enable investors to avail of a deduction from total income, as permitted under the Income Tax Act, 1961 from time to time.
The risk grade is above average, and the return grade is above average. The fund has a beta of 1.01 indicating fund movement is very much related to the market movement.
The fund is rated 4-star by Morningstar. The fund has a relatively high risk (measured by standard deviation) than the category average.
| Pros | Cons |
| Fund has outperformed the category average when the market was falling. Tax benefit. | The return grade is above average. |
9. PGIM India ELSS Tax Saver Fund Direct Plan-Growth
Fund analysis:
The fund has outperformed the benchmark and the category marginally over the long-term period. The fund is rated 5-star by Morningstar. The risk grade is average, and the return grade is above average.
The fund follows a blended style of investing, which means it has both value and growth stocks in its portfolio. The fund has low risk (measured by standard deviation) than the category average.
| Pros | Cons |
| Consistent performer.Tax benefit. | The fund has a high expense ratio. |
10. UTI Long-Term Equity Fund Growth Option Direct
Fund analysis:
The fund has a well-diversified portfolio of 59 stocks, investing in growth stocks across market capitalization except for the energy sector, with major holdings in large-cap (69.73%) companies and the rest in mid-cap (24.14%) & small-cap (6.12%) companies.
The risk grade is average, and the return grade is above average.
The fund is rated 4-star by Morningstar and the fund has given satisfactory returns over the long term. The fund has low risk (measured by standard deviation) than the category average.
| Pros | Cons |
| Fund has outperformed the category average when the market was rising. Tax benefit. | The fund has a high expense ratio. |
What are the features of ELSS Funds?
Here are some of the features of ELSS Funds to help you become an educated investor:
1. Lock-in period
ELSS Mutual funds have a lock-in period of 3 years. You can keep your money in the fund for longer than the given period but the 3-year period is mandatory.
You cannot take the money out before this period ends.
2. Equity-based investment
One of the features of ELSS is that it is an equity-based investment. About 80% of investment is equity while 20% is invested in debt and hybrid funds.
The portfolio is well-diversified and helps you as an investor beat the odds in the long run with sufficient exposure and risk management.
3. Portfolio Manager
ELSS mutual funds are managed by fund managers who have years of experience and adequate financial knowledge to make sound financial decisions.
Your money is protected and managed by the best professionals.
4. Different ways to invest
When it comes to ELSS investments, you can either place a lump sum order or a SIP order. Some lumpsum amounts as little as Rs. 500 while some SIP investments start at Rs. 500 to Rs. 1000.
You can invest more and build a bigger corpus by the end of the 3-year period to meet your financial goals.
5. Tax benefits
You can have up on taxes with ELSS mutual funds. This investment is covered under Section 80c of the Indian Income Tax Act, 1961.
You can claim a tax refund of Rs. 1.5 Lakhs in a financial year. Thus a tool to save money and build a sizeable corpus for your financial goals.
What are the advantages of investing in ELSS Funds?
Some advantages of ELSS Funds:
1. Disciplined Investor
ELSS mutual funds have a lock-in period of 3 years which means that you will automatically become a disciplined and long-term investor.
This helps you create a list of goals and manage your funds accordingly. If you invest via SIP, then making regular investments to this ELSS mutual fund plan is a great way to start.
2. Benefits of savings
ELSS Funds gives the opportunity to create wealth and save on taxes. The ELSS funds generate a minimum of 10%* investment (This is subject to change with market risks) and is considered under tax deductible.
3. Tax Benefit
As per Section 80C of the Indian Income Tax Act, 1961, you can claim a tax rebate of INR 1.5 Lakh of your ELSS Fund investment.
The gains from ELSS funds up to INR 1 lakh is not taxable by law, while above the set limit of INR 1 Lakh is taxable at 10%.
4. Lower lock-in period
ELSS Mutual Funds have a lock-in period. It is shorter than that of other investment tools like National Pension Scheme (NPS), the Provident Pension Fund (PPF Scheme), and tax-saving Fixed Deposits.
Your money is locked in for 3 years only.
5. Tax Savings
ELSS can save taxes and claim up to Rs. 1.5 lakhs under the Section 80c of the Indian Income Tax Act.
Whom the funds are suited for?
ELSS are tax-saving funds that every investor should have in their portfolio. This fund adds value to your overall investment plan, helps you stay invested without any breaks and saves you money in taxes.
Whether you are a risk-loving or risk-averse investor, this type of investment is stable, managed by professionals and has the dual benefit of creating wealth as well as saving your money in taxes.
FAQs
Is ELSS taxable after 3 years?
ELSS have a lock-in period of three years. The gains generated up to Rs 1 lakh ae tax-free, and any gains above this limit attract a long-term capital gains tax at 10%
What ELSS means?
ELSS stands for Equity Linked Savings Schemes. These are Mutual fund investment schemes that help you save tax and create wealth. It has a lock-in period of 3 years.
Is ELSS better than PPF?
Both ELSS and PPF are tax saving investments. These investments allow you to create wealth while saving your current income tax. The former has a lock-in period of 3 years while the latter has 15 years.
Is ELSS and SIP same?
No, SIP is medium of investment while ELSS is an investment tool. You can start an SIP for a ELSS mutual fund.
Conclusion
ELSS is the only equity-linked mutual fund scheme that provides Tax Benefits to its investors under Section 80 C of the Income Tax Act for an amount up to Rs. 1.5 Lac.
And has the shortest lock-in period. There are two ways to invest in this scheme i.e., SIP (Systematic Investment Plan) or Lumpsum. The preferable mode of investing is Lumpsum as funds will be locked for 3 years.
Consult an expert advisor to get the right plan for you
Disclaimer:
This is not recommendation advice, use it for educational purposes only. Mutual Fund investments are subject to market risks, read all scheme-related documents carefully. The NAVs of the schemes may go up or down depending upon the factors and forces affecting the securities market including the fluctuations in the interest rates. The past performance of the mutual funds is not necessarily indicative of the future performance of the schemes.
recommended reading
4 essential tips on investing in your child's education
Life becomes easier and more manageable with planning. A very important part of a happy and balanced life is managing your finances well.
This responsibility becomes manifold if you have a family to provide for. Prioritizing the prior planning of your child’s college education can make your retirement life effortless and stress-free.
Put away savings to preserve wealth. Invest money to generate more wealth. At the end of the day, gaining that fine balance between your savings, investments, and spending habits is what will secure a beautiful future for you as well as your family.
Here are some pro tips on how to invest and save for your children’s college education.
1. When to start?
Timing is everything. The logic is simple - the earlier you start, the more wealth you can generate and accumulate.
You may begin as early as the family planning stage itself. Even if you do not have a clear sight of the stream of academics your child might pursue later in life, it does not hurt to put away money.
As your child grows up, they might decide upon what line of academics they want depending on their career goals.
Your savings will come in handy in reassuring your child that you are perfectly prepared to back them in realizing their dreams as there will already be a considerable amount of funds they can count on.
2. Compartmentalise your savings
The habit of saving money regularly is one of the healthiest habits one can inculcate. But mastering the art of saving requires self-regulation and a sense of organization.
Putting away a bulk of money indiscriminately is not the most effective way of saving.
Keep track of your expenses and your income; device upon an amount you can afford to put away as savings. Make a list of all the things you need to save for - emergencies, education, health, housing, and so on. Divide your savings accordingly.
The act of compartmentalizing savings can also be effective in regulating your spending habits. You can also inculcate this healthy habit in your child from an early age by encouraging them to save money from their monthly allowances.
3. Consider different investment options
Investing is always an improvement upon saving because investments can generate new wealth. Thus, it is not enough to just put away money as savings; you also need to allocate funds to certain investments that suit your monetary goals.
There are different kinds of investment channels you can opt for. Some of us prefer fixed or recurring deposits while others want to generate more returns and go for mutual funds.
Mutual funds can be of different types depending on the factors like the amount of risk, duration, return rates, etc.
The mode of payment can also vary. For example, you can go for a one-time investment or you can choose monthly SIPs. Be well aware of all kinds of investment plans available so that you can choose the best one for yourself.
4. Invest in a global education
Your savings and money made from investments will be especially useful when you send your child abroad to pursue a college education.
Even if you are not sure about the possibility of global education in the future, it is always advisable to remain prepared for the same.
Simply saving money is not enough. Investing is a better idea and in the case of global education, it can be beneficial to invest in foreign stocks.
This is because the value of the Indian currency is forecasted to fall in comparison to other stable currencies in the world.
This means that the cost of living and studying abroad will be way higher than the cost of living and studying in a new city within India.
Once you set your financial goals, find out about investment schemes with international equity funds from countries like the US, so that you can make money in a more stable currency.
Conclusion
There can be several investment goals relating to different parts of your life like yourself, your spouse, relatives, housing and accommodation, health, gadgets, and emergencies. Mixing these up will only cause chaos and distress.
Hence, it is important to think separately about saving for your children’s college education and indulge in smart investments.
Consult an expert advisor to get the right plan
TALK TO AN EXPERT
4 W’s of Balanced Advantage Funds
What is Balanced Advantage Fund?
A balanced advantage fund is a fund that can invest 0-100% in the equity market or 0-100% in the debt market dynamically as per the prevailing market condition.
For example - If a fund manager finds that the price of the equity market has gone up, he will tilt the portfolio more towards the debt market.
Likewise, if the equity market trades at a discount, then the fund manager can tilt/shift the portfolio towards the equity market.
The valuation is the internal process of the fund. Based on valuation, the fund manager can take the call. This way, the fund manager can take the opportunity and change the asset allocation.
The fund manager can go aggressive in the equity market or can also decide to play conservatively to reduce the portfolio's volatility. The aim is to minimize the portfolio's downside risk and maximize the returns.
Who should invest?
Investors who are looking for long-term wealth creation.
Investors who are not comfortable with the market volatility.
Investors who do not want to face high volatility and looking for equity-like returns.
Investors who are unsure which type of fund they should invest in, whether in the equity or debt-oriented fund.
Risk-averse equity investors with an investment horizon of more than three years.
Additional read: Financial mistakes to avoid
Why should you invest?
A balanced advantage fund is a dynamically rebalancing fund between two asset classes, i.e. equity and debt.
It has the complete flexibility of rebalancing from 0-100% in both asset classes.
It provides you with better risk-adjusted returns.
It manages the equity market volatility and provides stability in the portfolio by diversifying the portfolio into the debt market.
It offers you equity-like returns, which help your portfolio to grow at a much faster rate than debt funds and also helps you to beat inflation.
Minimizes the downside risk and provides scope for growth by investing in the equity market.
When should you invest?
When the volatility in the equity market increases and you do not want to have such high exposure to the prevailing volatility.
When you want equity-like returns but do not want to face high liquidity.
First-time mutual fund investor looking for long-term wealth creation.
Conclusion
Try to allocate some portion of your portfolio towards a balanced advantage fund if you want to reduce the portfolio's volatility. A balanced advantage fund is like all season fund.
Consult an expert advisor to get the right plan
TALK TO AN EXPERT
5 financial things to consider before child planning.
Both life and wallet will never be the same once you decide to have a baby. No event in your life will signify financial change quite the way this one does, from the first prenatal appointment to the day of their college graduation (and beyond).
5 financial things to consider before child planning
1. Create a budget
Before you start child planning, you need to have a budget in place. You and your partner may need to create a realistic budget based on your expenses and your streams of income. Once you know how much you can afford to spend, you will be able to tackle the costs easily.
A new child is a new family member that needs space! So if you need extra space once the baby is born, figure out what kind of home you can afford, whether it's a slightly larger apartment, a warm cottage, or a pricey house.
Will you want the latest baby things or your sister’s passed-on ones? Think about what sort of child care would you require and get candid with your expenses before you start making any purchases.
2. Costs associated with birth
As new parents, you need prenatal vitamins, alternative therapies, labor and delivery alternatives, and screening tests. Give yourself enough time to change or upgrade insurance plans should you need more comprehensive coverage.
Good health insurance is vital in this economy. Hospital bills, medical fees, and maternity costs can be high. According to estimates from the industry, a straightforward delivery could cost between Rs 50,000 and Rs 70,000, but a private specialty hospital could charge up to Rs 2-3 lakh.
A cesarean delivery could result in a cost rise of up to Rs 4-5 lakh. Before having a kid, you should make financial arrangements for the costs associated with the delivery and child care.
3. Consider maternity leave
The vast majority of Indian employees are not entitled to paid family leave. If the mother is employed, you might need to think about taking a lengthier (unpaid) maternity leave or a sabbatical for a year or two. This can be a huge financial loss for families that rely on both streams of income.
Paid parental leave is not always an option. Find out if your workplace offers paid leave for new parents and if there are any policies in your favor that you can utilize.
Determine the number of weeks covered and the proportion of your salary that is used. Do you have to use your sick and vacation days first?
If you don't have access to paid time off or you're going to take more unpaid time off, you might want to cut costs or rely on your savings.
Additional read: Money management tips for homemakers
4. Purchase life and health insurance
You'll want your child to be stable financially if something were to happen to you or your partner. A life insurance policy can assist pay for things like child care, housekeeping, cooking, and more.
Purchasing maternity insurance is the first action you can take to cover maternity costs. When purchasing health insurance, (even for a couple), it is important to confirm that the policy includes coverage for maternity costs and, if applicable, any applicable waiting periods. Additionally, by paying a larger rate, you might add pregnancy coverage to a current insurance policy.
Buying health insurance is most important when considering having a child. Get your health covered in your plan so that you are not financially burdened in case of a health emergency.
5. Plan for child’s education
Just like the prices of lemons and oranges are growing, the cost of education is skyrocketing. Saving for your child’s college is a necessity. When it comes to saving money for college, time and compound interest are your best friends.
Even while inflation is an unavoidable fact, keep in mind that education inflation is far higher. Utilizing the force of compounding is one approach to combat this, but it will only be effective if you have a long-term strategy in place.
You indeed have no idea what career path your child will take, but you still need to put aside a portion of capital that can be utilized when the time comes.
Right now, you need to think about the type of education you would like to offer because the practical costs of studying engineering in India vs the US would be very different.
From giving birth to seeing them off to college, watching your child grow and thrive is every parent’s dream! So give those dreams wings by planning ahead and investing for their bright future!
Consult an expert advisor to get the right plan
TALK TO AN EXPERT
5 Pro tips on creating your child's education fund
Everyone speaks about the rewards of preparing early for education funds and securing them as soon as possible.
What they forget to explain is how to reach that goal. Fear not, for we have prepared a list of things you might want to tick off if you want to secure your child’s education.
1. Choosing the right platform is important
There are a number of investment platforms available for investors. As an investor with a goal in mind (the education fund for your child), it is important to choose a platform that is built for that purpose or has certain advantages in the pursuit of your goal.
There are two great advantages of choosing a goal-specific platform - one, you separate your investments in a way that you know how much amount is set aside for that particular goal every month, and second, you get the added goal-related benefits that the platform could offer.
In the case of EduFund, a platform built for parents to save for their children's education fund, you have added advantages like readily available education loans if you fall short, or free counseling if your child needs it.
2. Investing in the right mutual funds
Once you decide to invest in mutual funds to achieve higher returns than Fixed Deposits, you also need to do your research to find which investment schemes are best suited for you. Many factors play crucial roles in this procedure.
For example, one of the first things you need to consider is the balance between your monetary goals and the level to which these will be fulfilled by the fund returns and the risk associated.
Time is another important factor that will shape your decision in this matter. You also need to consider what exactly you want out of your investment whether it is tax reductions or high returns with high risks or more stabilized returns with low risks. To indulge in smart investments, stay aware of the best investment schemes currently trending in the stock market.
3. Investing in international stocks
Parents who like to stay alert about the current trends related to the education system and finances must be well aware of the phenomenon called education inflation.
This is what makes a global education exponentially more expensive than one attained within India.
The value of the Indian Rupee has depreciated over the years against foreign currencies like the American dollar. This means that the cost of a course pursued in a foreign land like the US or the UK will be tenfold compared to the same course pursued in this country. The cost of living will be equally high overseas.
A smart way to deal with this problem is to invest in international equity funds. This means higher returns because if you invest in US stocks, you will be earning in dollars, not rupees.
Moreover, if your investments in Indian stocks get affected by market fluctuations, you can still depend upon your foreign stock investments which will remain relatively more stable.
4. Consider the availability of education loans
Sometimes your life savings and your investment returns are not enough to fund your child’s education. Do not worry. Education loans can take care of your child’s aspirations in such situations.
Even if you are in a position to be able to afford your kid’s dream college, student loans are still a healthy way to teach your kid the value of money and how to build credit.
Creditworthiness is a virtue that will financially discipline your child so that they can take monetary decisions in your absence. It will also ensure that they can take future loans as part of their education fund at low-interest rates.
Only loans exceeding a very high amount of money require collateral or a security deposit, which means you can easily avail of student loans.
5. The right guidance for your children
Career and academic counseling sessions are crucial for your kid if they are going through a transition phase in their lives.
As their primary caregiver, you are entitled to guide their way but sometimes what might be required is professional help. You are longer required to pay for these counseling sessions.
A platform like EduFund offers them the best education counseling services in India for free of cost. Let nothing stop your child from achieving their goals.
6. Expert advice to get you to your goal
EduFund believes in helping you attain as much clarity on financial affairs as possible. In case of expert advice on investment, you can rely on the world-class experts from EduFund.
The Edufund app provides you with all the useful tools to attain the best from your child’s education fund.
For example, it comes with a calculator that helps you calculate the education cost. This is a smart calculator developed to give you inflation-adjusted rates.
This is the first step toward getting an idea of how much you will need to invest or save up as an education fund.
FAQs
How do I plan my child education fund?
Starting early is key to building your child's education fund. You can start saving with mutual funds, PPF, US stocks, Indian stocks, fixed deposit and much more. Before starting it is important to consult a financial advisor and figure out the cost of education before starting an SIP.
Which fund is best for child education?
Here are some of the best funds for your child's education fund:
Axis Long-Term Equity FundSBI Equity Hybrid FundParag Parikh Flexi Cap FundAditya Birla Sun Life Tax Relief 96 Fund Growth Aditya Birla Sun Life Tax Plan-GrowthDSP BlackRock Tax Saver Fund Growth Axis Long-Term Equity Fund Growth
How do you build a corpus for child education?
The first step to building a corpus for child education fund is to figure out the cost using the College Cost Calculator. Knowing the financial goal you need to invest in before starting an SIP helps you remain focused and know the exact amount you need to save monthly to get started.
Conclusion
What seems like a mammoth task can be easily managed by diving it into smaller tasks and simplifying it. Each small step is quite crucial in itself.
But once you have the checklist ready, you can be sure if not losing sight of things.
DisclaimerMutual fund investments are subject to market risks. The previous performance of a fund or scheme is no guarantee of future success. Please read the offer document carefully before investing.
5 reasons why SIP is the best investment choice?
A systematic investment plan or SIP is the best plan that helps you invest in mutual funds on a regular basis. You can choose to invest weekly, monthly or even quarterly – the most popular choice being monthly.
There are multiple reasons why SIPs are the best way to grow your money especially when you have a goal to plan – e.g. your child’s education. SIPs can be bought easily and you can start with a very low amount - Rs. 500 per month. In this blog, we will talk about the ‘Big 5 advantages’ that SIPs offer to you as a parent.
But before that, let's understand what a SIP is
What is SIP?
A SIP or systematic investment plan is an investment mode through which an investor can create a regular mechanism of investment for themselves.
Let's take the example of investor X. Investor X wishes to invest Rs. 10,000 every month in a mutual fund.
In this case, investor X can create a SIP for a fund they want to invest in and the money will be deducted every month automatically (the deduction can be weekly, monthly, or even quarterly, depending on the investor's choice).
Think of it as a recurring deposit, with better returns.
Now that we know what a SIP is, let's get to know why investing via SIP is the best choice you can make to enlarge your corpus.
CALCULATE MONTHLY SIP
5 Reasons SIP is the best
These are the 5 main reasons why you should invest via a systematic investment plan to reach your financial goals
1. Suitable for Long-Term Investment
Any financial advisor will tell you that if you want to invest long-term, SIP is the way to go.
The reason is simple, regular investing and automatic deductions keep investors motivated to stay invested and reach their investment goals quicker.
During the 2008 financial recession, many people withdrew money from mutual funds. However, the ones that remained invested via SIP, attained a huge profit once the markets rose.
Long-term investing makes sure that even if the market is down at the moment, once the markets rise, the investor will make profits.
2. Goal-planning
SIPs are good tools to plan for a future goal – to buy a 4-wheeler or to pay for college tuition fees maybe 10-15 years from now.
When you determine the amount required to achieve your goal, you will know how much you should invest and how long it will take to reach your goal. This will help in planning effectively.
Having financial goals is very important to creating a financially secure future. One must have a defined idea about what financial goal one wants to reach by the age of 30, 40, 50, and so on.
3. Effect of Compounding
Compounding is one of the biggest advantages of a SIP.
Over time your investments grow because you start earning returns not on your principal amount, but on the interest that keeps getting added to it.
Let's take an example. Suppose you invest Rs.1,000 in a mutual fund that gives you a yearly return of 10% p.a. Your amount becomes 1,100. at the end of the first year. At the end of the second year, the rate of return is 11%, this time the returns will be calculated on Rs. 1,100 and not the principal amount, which is, Rs. 1,000.
This ensures the growth of your corpus and is one of the reasons why experts advise you to not withdraw your investments when the market is down.
4. Curated by Experts
With the increasing number of fund types like equity, debt, mixed, gold-based, etc. there is a wide variety to choose from based on your risk appetite and preferred investment duration.
This has led to customized offerings based on individual needs, supervised by experts in the SIP domain. All you need is to specify your goal and timeline and you are provided with the best possible funds that can meet your future goals.
SIPs have become popular over the past few years, because of the ease of investing and the flexibility provided in terms of the amount of money that can be invested.
You can stay invested as long as you want, although average returns have been higher when invested in the long term.
Research also shows that the returns offered by SIPs are more than recurring deposits in banks, in the long term.
5. Automates Your Investment Experience
SIPs automate your investment experience, which makes you a regular investor. It is easy and convenient and because of the online surge, today, it is super easy to invest via SIP. If you choose the lump sum method, you will have to manually invest an amount and there may be times when you can miss an installment.
With automated installments and a streamlined process, investing via SIP has now become an extremely popular method, to reach long-term goals like saving up for your child's education.
FAQs
Why is SIP investment good?
By investing through SIPs, you will do away with the burden of timing the market as you could then avail the benefit of Rupee Cost Averaging. By investing through SIP, you will tend to invest in the up and down markets. This helps you shy away from the volatility of the market. Additionally, you will benefit from the power of compounding, which fundamentally generates returns not only on capital but also on returns.
Is SIP good for students?
Investing in SIP can be a huge benefit for students. It cultivates a healthy investment habit, and they can invest a small amount to start their journey. SIP is best for beginners and a comparatively safe investment vehicle.
What are the features of SIP?
A SIP offers the following features:
It is best for long-term investment, brings financial discipline, allows small investment amounts, benefits from the power of compounding, and is a comparatively safer investment tool.
Why do people prefer SIP?
A systematic investment plan helps bring discipline to an individual’s investment habits. A SIP will automatically deduct a pre-decided amount periodically. Investors also do not need to worry about timing the market while investing via SIP. It is one of the best investment vehicles for beginners.
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5 tips to know before investing in US stocks
If you want to invest in the US stock market to benefit from US stocks, you may start by opening an international trading account in India.
But before investing in US equities, here are the 5 important things to know before investing in US stocks.
1. Regulatory framework
One of the oldest, most effective, transparent, and well-regulated stock markets in the world is the one in the United States.
On US stock markets are listed some of the largest businesses in terms of market capitalization, sales, and profitability.
The worldwide exposure and flavor that US markets offer are crucial since many of these listed firms have a significant global presence, scale, and operational structure.
The regulatory body that monitors the operation of the US stock markets is the Securities and Exchange Commission (SEC), which was founded in 1934.
It guarantees the strict application of laws and rules that establish the highest standards of openness and integrity—essential for stock markets as well as for the safety and trust of investors.
2. Impact of Foreign Exchange
The volatility in the value of the US and other currencies should be taken into account while investing in US equities.
This is because before any gain (or loss) for an Indian investment is realized, it would be converted using the appropriate exchange rate in the Indian rupee.
The gains (or losses) will fluctuate in lockstep with changes in the exchange rate.
An Indian investor must be aware that the exchange rate can be unpredictable and is influenced by a wide range of political, economic, and supply and demand variables.
3. Liberalized Remittance Scheme
According to the Reserve Bank of India's Liberalized Remittance Scheme, an individual may invest up to $ 250000 per year in US equities from India (LRS).
The cap covers any money sent abroad for purchases, travel, education, or other international transactions during the year.
The investor's brokerage account has to be filled before making any investments in US equities. Investors must complete Form A-2, which is available from RBI-authorized dealers. Any sum over the $250000 cap requires RBI approval.
Additional read: US stocks for investing in child education
4. Taxation
To make your efforts worthwhile, it is crucial to take into account the tax consequences of your international assets.
Due to the Double Tax Avoidance Agreement (DTAA) between the US and India, the same income cannot be taxed twice on investments made in the US stock market.
5. Dividend tax
The dividends from US stocks are taxed at a fixed rate of 30% for overseas investors. However, as a result of the tax agreement between the US and India, citizens of India pay a 25% tax rate (deducted before distribution).
However, because of the double tax avoidance agreement between the US and India, the tax paid in the US may be claimed as a foreign tax credit in your domestic filing.
6. Capital gains tax
Your assets in the US are not subject to capital gains tax. However, India requires you to pay tax on your overseas capital gains. This may be divided into two groups.:
Long-term capital gain (LTCG)If you keep the equities for more than 24 months before realizing capital gains, you will be subject to indexation advantages and a 20% tax rate in addition to any relevant fees and other surcharges.
Short-term capital gain (STCG)Standard income-tax regulations apply to any gains from assets held for less than 24 months, and they are added to your ordinary taxable income.
You must also take into account the recently implemented Tax Credited at Source or TCS. Under the new regulations, a 5% TCS will be applied to all international transfers over INR 7 Lakhs in a fiscal year. It is not an additional expenditure to deduct this advance tax when submitting your taxes each year.
Charges on US stock-broking account
Using an Indian stock brokerage account to invest in the US stock market is prohibited. You would need to create one with a US stock brokerage company instead.
To provide this service, the majority of Indian stock brokers who allow you to invest in US equities typically collaborate with a US stockbroker.
You would also be required to pay certain fees for a US stock broking account, just like you would for an Indian trading account.
This is something you should also take into consideration when you buy US stocks because these fees can reduce your earnings. These fees include Annual Maintenance Costs, brokerage charges, bank charges, transaction charges, and more.
Invest in the US stocks with EduFund
Download the EduFund app and create an account to start investing in US stocks. With zero charges and no hassle account opening process from the comfort of your home, you can start investing in FAANG stocks in your portfolio to geographically diversify your portfolio!!
Thus, investing in US firms and equities may give investors access to the worldwide market, credibility, and an opportunity to increase their wealth.
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5 top investments for risk-averse investors
All investments are associated with risks. Yet, the risk is not uniform, and it's essential to be aware of the different levels of risks linked with all types of investment instruments. This is why the first thing to consider before investing is how much of a risk appetite has – how much risk one is willing to take.
Want to know the best investment options for risk-averse investors but still generate good returns? Continue reading this article to know more!
What is risk averse?
Risk-averse refers to an investor who chooses to preserve the capital over and above its potential to generate returns that are higher than the average. Risk can refer to many factors – volatility, currency, market, credit rating, etc.
Risk-averse can also refer to a conservative investor. Low risk symbolizes stability in investments. A low-risk investment generates guaranteed reasonable returns, if not outstanding, above benchmark returns. But chances are near zero that the principal investment amount will be lost. Whereas a high-risk investment option may gain or lose money over time.
Risk-averse investors are unwilling to accept market volatility. They prefer their investments to be highly liquid - readily available to be withdrawn. Such investors usually include old investors or retired individuals who depend on their savings for their daily expenses.
Additional read: Taxation in mutual funds
Is FD a good option for risk-averse investors?
One should constantly adjust their returns against the current inflation rate. The current Fixed Deposit interest rates are 5-7% p.a. on average. But the current inflation rates are around 6-8% p.a.
Give these figures a thought. The price you pay for your everyday goods and services is rising at 6-8%, whereas your FD investments are growing at only 5-7%. FDs do not increase the value of your money over time. In fact, you actually lose money or its purchasing power over time.
Do you think FDs are the safest investment option? Banks defaulting on payments is rare but definitely possible. The Deposit Insurance and Credit Guarantee Corporation (DICGC) guarantees Rs. 5 lakhs per person per bank if the bank defaults.
Let's not forget the liquidity part of this instrument. Fixed deposits can have a lock-in ranging from 3-5 years. Banks penalize the investors for withdrawing money before the lock-in is over. This penalty is in the form of a reduction of interest rate by a certain percentage.
What are the best investment options for risk-averse investors?
The market is filled with many investment options for investors with varying risk appetites. Let's look at some of the best investment options for risk-averse investors:
1. Short-term bond fund:
The best alternative for investors who do not want exposure to FDs or volatile instruments. Short-term bond funds – bond funds with low maturity and a high
potential to offer better returns. Debt Funds with longer maturity are subjected to interest rate risk. But short-term bonds have a lower interest rate risk as their maturity period is much lower.
2. Municipal and Corporate Bonds:
State and local governments and companies usually raise money by issuing bonds to the public. Bonds offer lower risk than stocks. When a company is winding up, the bondholders are given first preference in the payment and settlement order.
3. Other debt funds:
Other debt funds include banking and PSU Funds, ultra-short duration funds, Dynamic Bonds, etc. You could always invest a lump sum in these debt-based mutual funds and opt for a Systematic Withdrawal Plan (SWP).
This would ensure that along with the returns being generated on your investments, you would also get a monthly income from these investments. This investment option is one of the best options for older people who want a monthly income.
4. Liquid funds:
Invest in top-rated liquid funds to avoid loss of capital with a higher degree of safety for your primary investment. Also, when the market moves up, your investment performs better and generates higher returns in line with the market.
5. Dividend growth stocks:
Stocks are not as safe as cash, savings, or other debt-based instruments. But they are safer than options and futures. Dividend-paying stocks are considered safer than high-growth ones as they minimize volatility, if not eliminate it.
You don't depend on the value of the stock as you get a dividend as a regular income on your investment.
Apart from debt-based investments, you could also apply a staggered investment approach in equity-based mutual funds for a long-time horizon.
A periodically rebalanced portfolio helps you minimize your portfolio volatility and ensures efficient capture of up-market and down-market movements even with equity exposure.
Take the help of an Investment Advisor who will guide you through goal-based planning and help you choose your investments that are most suitable to your goals and objectives and your risk appetite.
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5 types of mutual funds
Investing in mutual funds for your child’s education is always advisable. First of all, it is a less stressful option than investing in direct equity stocks because that requires you to have in-depth knowledge of market trends and fluctuations.
Secondly, with mutual funds, there are a variety of schemes you can opt for depending on a range of factors. These factors could include the time period for which you can invest before liquidating, the amount of money you can invest, the amount you require to secure the education fund, the level of risk you can take, and so on.
When it comes to building an education fund, here are the top 5 types of mutual funds you can choose from.
1. Large-cap mutual funds
The defining characteristic of large-cap equity funds is the fact that these funds invest in the top 100 Indian companies that have the highest market value.
Large-cap mutual funds can bring in impressive returns if you remain invested for a long period.
If you are a person who wants to avoid taking very high risks with your investments and has decided on investing early for your child’s education, this is the way to go.
The average returns rate has historically beaten that of Fixed Deposits and similar investment alternatives.
2. Mid-cap mutual funds
Mid-cap funds invest in Indian companies that come in the next best 250 in terms of market value. These funds are for you if you are ready to take on a higher level of risk. Justifiably, the return rates also tend to get higher.
One way to satiate the risk appetite of mid-cap equity funds is to let them season for at least 7-10 years.
If your child is in primary or middle school, investing in such a scheme will generate a wholesome amount of wealth by the time they are ready to pursue a college education.
3. Equity-linked saving schemes
Among the various perks of investing in mutual funds is the tax deduction benefit. Equity Linked Saving Schemes are devoted to enabling investors to save taxes, as the name also indicates.
The only catch here is that it has a compulsory lock-in period of at least 3 years. The aim here is to keep you invested longer to counter the risk level.
If you can spare that amount of time, then ELSS is definitely a go-to. An added benefit is the historically high level of returns.
4. Low-risk options
There is this whole myth surrounding mutual funds that they only come with a high-risk factor. On the contrary, a debt fund is also a kind of mutual fund that comes with low risk, so much so that it remains undisturbed by market fluctuations.
Debt funds are still a better option than Fixed Deposits because they can generate a higher percentage of returns. So, if you are not in favor of taking high risks, debt funds are a go-to.
5. Hybrid mutual funds
If you are confused about your investment options or even hesitant about risking too much, the answer to your problems is a hybrid mutual fund. This kind of fund is a mixture of equity as well as debt.
Hybrid mutual funds bring in the best of both worlds. They tend to generate good returns at low risk.
FAQs
What are the different types of mutual funds?
Large-cap mutual funds
Mid-cap mutual funds
Equity-linked saving schemes
Low-risk options
Hybrid mutual funds
Which type of MF is best?
The best type of mutual fund is the Hybrid mutual fund.
Which MF gives highest return?
Equity linked mutual funds are considered the mutual funds with the highest returns.
Conclusion
There will be miscellaneous financial goals you will be required to set if you are a family person. One among these might be to straighten up the roadmap to your child’s academic and career aspirations.
The first step is calculating your expected expenses with the help of an education cost calculator. The calculator will help you draw your investment map to fulfill your child's aspirations.
The earlier you invest, the more prepared you will be to make critical decisions as the moment arrives.
DisclaimerMutual funds are subject to market risks. The previous performance of a fund is no guarantee of future success. Please reach out to an expert to know more about the schemes before investing.
5 ways to make getting an education loan easier for your child
Today's expanding world of opportunity benefits greatly from education loans. Your child has so many educational courses to choose from.
A decent education is essential for your child's growth and development, and several institutions throughout the world provide student loans with low-interest rates to those who cannot rely on their savings.
Banks and other financial organizations provide outstanding education loans with a reasonable interest rate and loan payback time.
An education from a reputable university is the first step to a prosperous profession. The cost of college expenses is rising quickly, though, and for parents who might not have enough money, taking out an education loan sounds like a perfect alternative for their child.
In reality, the cost of higher education overseas and for Indian parents has increased enormously due to the rise of the dollar value versus the rupee.
This pattern is also observed in TransUnion CIBIL data, where the average ticket size of a newly issued student loan increased by 48 percent from INR 5.73 lakhs in 2015 to INR 8.5 lakhs in 2018.
So, here are the five best ways if you are planning to get a student loan for your kid and help them to pursue higher studies easily.
Choose the right course
Let your child choose a subject that fascinates them enough to make it their career. Don't allow your child to do what the majority of others are doing to deter them from following a passion of yours.
For example, a student who is required to study engineering could not do well or even finish the course if they are least interested in the subject
However, if the student in question were interested in law, he would make a brilliant attorney and have a successful profession as well as a happier life.
Therefore, a wise piece of advice for parents is to let their kids discover their passion by researching the course's requirements before making a choice.
After completing their education, you should consider your child’s career possibilities and see if they can find employment to help you pay off the debt.
Research about banks
Make sure to do your thorough research before choosing a bank. Avoid making rash or emotional decisions when applying for a loan.
By conducting an extensive study, you can comprehend the varied interest rates, processing costs, terms, and conditions, etc.
The amount you must repay varies depending on each bank's interest rate. You will need to spend and repay a certain amount of money for every point in the interest rate.
Verify if your loan's interest rate is fixed or fluctuating. Making a choice between these rates is crucial since it significantly impacts how you intend to repay your loan and how much your EMI will be.
Borrow only what you need
If you want to take out an education loan for your child, resist the urge to request the utmost amount permitted. If your child has any financial awards, such as scholarships, you should constantly assess how much you have or how much you can afford to support your child’s education.
Decide how much you want to borrow from the bank as an education loan after doing the math for the amount you have.
As a parent, you must help your kids understand that every amount they take will have a specific interest rate levied on it. Hence, it is essential to borrow only the amount they can repay.
https://www.youtube.com/watch?v=4gTQkdePOWM
Educate your child about the loan
Whether you want your kid to continue their education in India or overseas, you should be aware of the specifics of their current coursework and any loans you have taken out.
A VISA will allow your child to enter a foreign nation but does not give them access to everything. They could be questioned about their intentions and entry procedures at the airport.
Your child should be ready to answer any queries about their course, organization, teachers, tuition costs, loan amounts, repayment terms, interest rates, etc.
Your kid should also be aware of their personal information and information about their families, such as names, birthdates, residences, levels of education, and jobs.
Plan for repayment
Even though interest starts to accumulate from the first month, students may occasionally be given a moratorium or one-year grace period before they must begin making loan payments.
One advantage of this time frame is that, even if your child can pay the EMI after this grace period, you can start repaying the EMIs early and assist your child in paying off the loan more quickly by doing so.
Early investment and saving can help reduce the financial burden that a high-quality education places on families, but some parents may not have the opportunity to do so since they are already dealing with admissions. An education loan could be the best option in such situations.
However, choosing the correct course, university, and financial institution may assist enhance the possibilities of simple loan payback, making the student debt-free sooner rather than later. This is in addition to creating a decent repayment plan.
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