Mutual funds have long been a popular investment option for individuals looking to build their wealth. With the rise of the Indian economy, mutual funds have become an increasingly important aspect of investment options for investors seeking higher returns and lower risk.
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One of the popular options in mutual funds is ELSS mutual funds i.e, Equity linked savings scheme. Investing in the right mutual fund can help you achieve long-term financial success and security.
Best ELSS Mutual Fund
ELSS mutual funds are tax-saving mutual funds that allow investors to claim deductions of up to Rs. 1.5 lakh under Section 80C of the Income Tax Act. It has become a popular investment vehicle as it offers tax benefits to investors. The following are some of the best ELSS Mutual funds in India.
1. Axis Long Term Equity Fund: It has a higher focus on blue-chip companies that operate in leading sectors such as finance, technology, and healthcare. The fund has a three-year lock-in period and has delivered an average annual return of 14.89% since its inception.
2. Mirae Asset Tax Saver Fund: Mirae Asset has emerged as a popular fund house in India and its tax saver fund has been a top performer in this segment. It has delivered an average annual return of 20.56% since its inception.
3. Aditya Birla Sun Life Tax Relief 96: This is one of the oldest funds in this category and has consistently delivered returns above the benchmark. It has a three-year lock-in period and has delivered an average annual return of 8.97% since its inception.
Thematic Mutual Funds
While ELSS mutual funds provide tax benefits, thematic mutual funds provide investors with the opportunity to invest in specific sectors such as healthcare, technology, and infrastructure, among others. By investing in these sectors, investors benefit from the potential growth of the industry and the companies operating in that particular sector. Some of the popular thematic mutual funds are:
1. SBI Healthcare Opportunities Fund: This fund invests predominantly in healthcare companies and has delivered an average annual return of 17.87% since its inception.
2. Tata Digital India Fund: This fund invests in digital companies and has delivered an average annual return of 21.39% since its inception.
3. Franklin Build India Fund: The fund invests in infrastructure companies and has delivered an average annual return of 14.90% since its inception.
Building Wealth with Mutual Funds
Mutual funds provide investors with various benefits such as diversification, professional management, convenience, and liquidity. Diversification is important to reduce the risk of losing money and professional management is crucial for investors who have limited knowledge of the financial markets. Convenience and liquidity provide flexibility to investors, which is important for those who have uncertain investment timelines.
Investors need to follow a disciplined approach when investing in mutual funds. They should avoid buying funds based on market trends or by imitating others. Instead, they should create a portfolio aligned with their financial goals and risk tolerance.
Asset allocation is an important aspect of the portfolio creation process, as it helps to diversify risk across different asset classes. Investors must ensure that they have a diversified portfolio, which includes various asset classes such as equity, debt, and gold.
Investors should also consider their investment horizon before investing in mutual funds. Equity funds are suitable for investors who have a long-term investment horizon of more than five years.
Debt funds are suitable for those investors who have a relatively shorter investment horizon and are seeking stable returns with lower volatility. Gold funds are suitable for investors who want to diversify their portfolio across different asset classes.
While mutual funds provide investors with various benefits, they also come with certain risks. The performance of mutual funds is directly linked to the performance of the financial markets. Therefore, investors should be aware of the risks associated with the Indian financial markets, such as volatility, currency risk, and inflation risk.
Conclusion
Mutual funds provide investors with various options to build long-term wealth and achieve financial success. ELSS mutual funds offer tax benefits, while thematic mutual funds provide investors with the opportunity to invest in specific sectors.
Investors must carefully evaluate the risks and potential returns associated with different mutual funds before investing. A disciplined approach to investing in mutual funds, with focus on diversification and asset allocation, can help investors build a robust portfolio and achieve their financial goals.