A complete guide to buying ELSS online

We guide you through the steps of buying the ELSS fund online, with pointers on which factors to consider when doing so.

Every investor today wishes to gain as much out of their investment as they possibly can. Investors with a higher risk potential always prefer to park their money in equity schemes. But if you want an investment in equities with a shorter lock-in period and high gains, then you should consider buying an ELSS online.

The ELSS (Equity Linked Savings Scheme) is a tax saving equity MF. You can buy the ELSS online quite easily – simply follow these steps in buying an equity linked savings scheme:

* Invest early for bumper returns. Investing in equity MFs is different from investing in other funds, because the growth of the fund depends on your entry and exit timings. The earlier you invest and longer you stay invested, the more the growth on the equity securities that the scheme invests in. We recommend opting for the SIP when you buy the ELSS online. The SIP helps you insulate your money against capital loss when markets are riding high.

* Do not ladder your ELSS investments. Some investors buy multiple ELSS equity fund schemes with a large lump sum split into smaller amounts. The problem with this approach is that you do not get diversification by investing in just one asset class. Another disadvantage is that you do not get tax savings per ELSS fund – the tax benefit is cumulatively offered for Rs 1.5 lakh under Sec 80C of the IT Act. So, you will have many ELSS equity MFs without appreciable growth or tax benefit. Instead, buy a single equity linked savings scheme with a large lump sum amount for high gains.

* Buy ELSS online from a reputed fund house. Partnering with a leading fund house gives you the obvious advantages of access to top rated equity MF schemes, as well as an experienced fund manager overseeing your investment. Your fund manager can advise you on the best time to redeem the fund after the lock-in period of three years has elapsed, or the benefit of staying invested for a longer time.

* Look for annualised returns on top rated funds. The equity linked savings scheme has a high rate of return, which generates good capital appreciation. When you decide to buy ELSS online, look for annualised returns over 10%.

* Buy the ELSS online. Now that you are certain of which scheme to buy, you can register for the mutual fund purchase with the fund house online. Register by linking your bank account, PAN and Aadhaar number. Once registered, you can buy the ELSS online and also easily monitor the fund growth from time to time by checking NAVs.