What are the best ELSS mutual fund investment strategies?

An ELSS, or equity-linked savings strategy, has the lowest lock-in time of all the alternatives accessible to an investor. Although the ELSS mutual fund offers significant returns, it also has a larger risk than other investment options like as PPFs and life insurance policies. Here are some smart strategies to invest in ELSS mutual funds while lowering your risk.

Take advantage of the sip opportunity.

Don't put all of your money into ELSS at the end of the year. These are equity programmes, and the best way to invest in them is through monthly SIPs. However, if you begin in January, you will only be able to complete 2-3 SIPs before the end of the fiscal year.

A taxpayer should start an SIP in an ELSS fund from April through the whole financial year so that he does not get worried by the volatility

Examine long-term results

Don't be swayed by a scheme's short-term results. Before you invest, look at the track record over a lengthy period of time. Investors should consider not only a scheme's performance over the last 5-7 years, but also how long the fund manager has been in charge.

Examine the qualities of your portfolio.

ELSS funds aren't all the same. Some portfolios are heavily weighted toward large-cap stocks, while others include a fair balance of large, mid, and small-caps. The risk and profit for investors are also determined by the portfolio mix. The best ELSS funds are divided into three categories. Select a fund that matches your risk tolerance.

Do not choose the dividend option.

In the last two years, the tax rules have altered. Dividends and long-term capital gains over Rs 1 lakh are now taxable. While capital gains tax can be managed and adjusted, dividends are added to income and taxed at regular rates. So, in your ELSS fund, don't choose the dividend option.

Continue to keep an eye on your results.

While holding stock funds for a long time is a solid approach for long-term wealth accumulation, investors must also keep an eye on their portfolios. Some of Roshan Aswani's ELSS funds have underperformed the market. Long-term underperformers HDFC Taxsaver and SBI Long-Term Equity should have been abandoned years ago.

Which ELSS fund should you invest in?

ELSS funds depends on risk exposure. Choose the one that best suits your preferences.

Significant Risk : These funds can be very profitable in bullish times because they invest over 40% of their assets in mid- and small-cap firms. However, be wary of the volatility.

High-risk: These funds are also exposed to mid- and small-cap stocks to the tune of 30-35 percent. They'll be less volatile, but they can be just as profitable in rising markets.

Moderate risk: Because these funds invest 75-80% of their assets in large-cap equities, they will be less volatile. Returns, on the other hand, will also be modest