Are You Investing In Too Many ELSS?

  Author: Kundan Kishore

As the financial year heads towards a close, there is always a rush for making tax-saving investments. Equity linked savings scheme (ELSS) offered by mutual funds, allow investors to invest upto Rs 1.5 lakh annually under Section 80C for tax deduction. It is popular as a tax saving investment as it helps save tax up to the annual investment limit and also provides the typically high growth from equities. However, there are people who buy a new ELSS plan every year and end up building a collection of them over time. Often, the results from so many ELSS are far from ideal. So, what’s the right number of ELSS plans to have? Well, here are a few tips.

Ideally have 2-3 ELSS There is no fixed rule for the number of ELSS you must have. However, it is a difficult task for investors to track and manage too many ELSS in a mutual fund portfolio. Ideally, 2-3 schemes with a decent track record can be sufficient depending on your investment amount. This will also help you diversify adequately across different schemes and by definition, fund managers too.

Examine ELSS portfolios Before investing in an ELSS, examine yourself, or ask your advisor to take a look at individual portfolios of the ELSS. This is to determine whether the schemes are different in terms of portfolio composition. There is little point in having more of the same.

To conclude, one can say that when it comes to ELSS, too many ELSS maybe too much of a good thing and may not be great for you. You need to invest in them for just the right amount and in the right number of schemes. 

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