What are tax-saving mutual funds? Its benefits explained!

Investing is a known way to generate and manage wealth. Investing is an excellent way to put your excess money to good use instead of letting it sit idle in a bank account. Although investing has several benefits, investors are often confused by the many available investment options. Out of the many investment options, many investors opt to invest their money in a mutual fund.

Mutual funds pool money from numerous investors and use that money to buy different securities like stocks, debt instruments, government bonds etc. These funds are managed by fund managers who make investment decisions to generate returns for the investors. Here are some benefits that have made this a popular investment option:

Tax saving option

One of the great benefits of this investment option is that it helps you generate returns and save tax. ELSS mutual funds are a great way to save tax. These funds have a tax exemption of up to Rs.1.5 Lakh under section 80C of the Tax Act, 1961.

Lowest lock-in period

Among the several tax-saving investment options, tax-saving mutual funds have the lowest lock-in period of three years. This means the investor can not redeem their units before the lock-in period. Other investment options have longer lock-in periods, like five to 10 years. Moreover, an investor can stay invested and reap the benefits even after the lock-in period. The low lock-in period makes this tax-saving investment option more liquid than other options.

Expert management

Investing in your can be tricky. If one makes a poor investment decision, it can cause a dent in their capital. Expert fund managers manage mutual funds. These managers make use of advanced strategies and techniques to make investing decisions. This makes it a suitable investment option for beginners that don’t have vast knowledge about the markets.

Investing through SIP

An individual does not require a large sum of money to invest in tax saver funds. One can invest a small amount of money at regular intervals through a Systematic Investment Plan. An investor can add new units of the fund weekly, fortnightly, monthly, or quarterly. SIP has several benefits, and an investor can easily modify, pause and resume it at their convenience.

Exposure to equity

Investing in equity is considered a great long-term investment option. An ELSS fund can allow an investor to invest in equity while also saving tax. This is an excellent way for investors to build a portfolio and stay invested for an extended period.

An investor can reap several benefits by investing in tax-saving mutual funds. It is a great investment option for new investors and people that are unaware about investing.

For more information visit - https://www.dspim.com/invest/mutual-fund-products/equity-schemes/ELSS-tax-saver-fund/dspts-regular-growth