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Should you give ELSS a miss this financial year due to market volatility

Whenever there is a huge volatile phase in the stock market, it is customary for some investors to ask their mutual fund advisors whether they should continue with their mutual fund investments, considering the volatility in the stock market.

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Last Updated: Mar 04, 2020, 10.31 AM IST
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The stock market is down 1,000 points one day, and up 900 points the other day. Again, the market is down another four-digit number the next day.

No, this is not an imaginary scenario or conversation. This is what compulsive Sensex-watchers are speaking among themselves these days, after witnessing huge swings in the key market index during the last five days, owing to a possible endemic across the world. And some of these investors are thinking of giving Equity Linked Saving Schemes or ELSS a miss this financial year. Perhaps even the next financial year.

Volatility scares investors, especially the new equity investors. Whenever there is a huge volatile phase in the stock market, it is customary for some investors to ask their mutual fund advisors whether they should continue with their mutual fund investments, considering the volatility in the stock market. Some fence-sitters would also wonder whether they should postpone their investments due to the prevailing volatile conditions in the market.

As usual, advisors are talking about the supremacy of equity mutual funds to create wealth over a long period and why investors should ignore short-term volatility and continue with their investments to meet your long-term financial goals.

The trouble is that in times of volatility such talk would sound self serving. However, that is the only way to build wealth over a long period to meet your important long-term goals like children's higher education, retirement, and so on.

For example, just look at the long-term returns offered by equity mutual funds, including tax-saving mutual funds, over 10 or 15 years. The ELSS category has given an average annual return of around 11% in the last 10 years. Axis Long Term Equity Fund, the topper in the 10-year period, offered around 16% annual returns. Canara Robeco Equity Tax Saver Fund, the topper in the 15-year horizon, offered around 15%. HDFC Taxsaver Fund, the topper in the 20-year horizon, offered around 16%, according to Value Research, a mutual fund tracking firm.

Well, if the numbers sound convincing, drop your impulsive decision to give ELSS fund a miss this financial year. Go ahead with your original plan and invest in tax-saving mutual funds to achieve your long-term financial goals. And do not wait for the last moment to finalise your investments in the next financial year. Start an SIP at the beginning of the financial year.

Here are our recommended ELSS schemes you may consider to invest: Best ELSS or tax saver funds to invest in 2020

Also Read

What are ELSS or tax saving mutual fund schemes?

ELSS and IDFC Tax Advantage (ELSS) fund

Are ELSS mutual funds losing their charm?

Save Tax with IDFC Tax Advantage (ELSS) Fund

Are taxpayers ignoring ELSS mutual funds this financial year?

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