Home > Money > Question
Need Expert Advice?Our Gurus Can Help

Should I Continue Investing in My Current ELSS Funds?

Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Sep 16, 2024

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more
Asked by Anonymous - Sep 14, 2024Hindi
Money

Sir, I am investing in certain ELSS funds like Bandhan, Mirae Asset, DSP and Canara Robecco for the past three years. The lock in period is now over. I have received returns ranging from 38% to 58% in these funds. Should I continue investing in the same, or transfer this to other categories like Small caps, mid caps etc.

Ans: You have been investing in ELSS funds for three years, which shows a good level of discipline. Achieving returns between 38% and 58% is quite impressive, especially within such a short duration. ELSS funds have a lock-in period of three years, and now that this is over, you have the flexibility to evaluate and potentially reallocate.

However, before taking any action, it’s essential to assess both your financial goals and the overall market situation. Since ELSS funds are equity-linked, they tend to offer high returns in the long run. But it's important to align your investment choices with your financial needs and risk appetite.

Continue in ELSS or Switch?
Let’s break down the factors to help you decide whether to continue investing in these ELSS funds or shift to other categories such as small-cap or mid-cap funds.

Performance Consistency: The ELSS funds you’ve mentioned have given strong returns, but consistency is key. Look at their long-term track record, not just the last three years. Consider whether they have consistently outperformed their benchmarks over the past 5-10 years.

Tax Benefits of ELSS: One of the primary reasons for choosing ELSS is the tax-saving benefit under Section 80C. Since your ELSS funds are no longer locked in, you are free to withdraw or shift funds. However, if you still need tax-saving instruments, continuing with ELSS might be wise.

Your Risk Appetite: ELSS funds are generally less risky compared to small-cap and mid-cap funds. If your risk tolerance is low, you might want to stay invested in ELSS funds. On the other hand, if you're looking for aggressive growth and are comfortable with more volatility, small-cap or mid-cap funds might suit you.

Investment Horizon: If your investment horizon is long-term (10 years or more), then investing in small-cap or mid-cap funds could yield higher returns. These categories are known for their potential to generate substantial growth, but they also come with higher risk.

Assessing Small-Cap and Mid-Cap Funds
Potential for Higher Returns: Small-cap and mid-cap funds tend to outperform large-cap and diversified funds over the long term. They invest in smaller and growing companies, which have the potential for higher growth.

Increased Volatility: The small-cap and mid-cap segments are also more volatile. They can experience sharp fluctuations based on market conditions, so you need to be prepared for potential short-term losses.

Diversification Benefit: If you are currently heavily invested in large-cap or diversified equity funds, adding small-cap and mid-cap funds can offer diversification. It’s important to have a well-balanced portfolio to spread risk across different segments.

Regular Review of Portfolio: Shifting to small-cap and mid-cap funds will require you to review your portfolio regularly. These funds are more sensitive to market conditions, and you will need to assess their performance more frequently compared to large-cap funds or ELSS.

The Role of Asset Allocation
Before making any changes to your investment, revisit your asset allocation strategy. The key to long-term financial success is ensuring that your portfolio is diversified across different asset classes. Here are some tips:

Equity Exposure: Since equity is known for long-term wealth creation, ensure that your portfolio has sufficient exposure to equity. If your risk tolerance is high, increasing exposure to small-cap and mid-cap funds might make sense.

Debt Exposure: If you have already allocated a significant portion of your portfolio to equity (including ELSS), you might want to balance it with some low-risk debt instruments like PPF, FDs, or bonds. This will reduce the overall risk and provide more stability.

Rebalance Regularly: Regular rebalancing is necessary to maintain your desired asset allocation. If one part of your portfolio grows faster than others, it might lead to overexposure to that asset class. Ensure you review your portfolio at least once a year.

Disadvantages of Direct Funds
If you are currently investing directly in these funds, it's important to understand that direct plans require you to manage everything on your own. Here are some downsides:

Lack of Professional Guidance: Direct funds don’t offer the expert advice and monitoring that come with regular funds through a certified financial planner. This can make it difficult for you to track performance and make timely decisions.

Time-Consuming: Managing direct funds requires significant time and effort. If you’re busy with your profession or other commitments, this might not be ideal for you.

Missed Opportunities: Without professional guidance, you may miss opportunities to rebalance or switch to better-performing funds at the right time.

It’s advisable to invest through a Certified Financial Planner (CFP), who can help you make informed decisions based on your risk profile, goals, and current financial situation.

Advantages of Regular Funds with a Certified Financial Planner
Professional Management: A CFP can help you choose the right funds and monitor your portfolio regularly, ensuring that it stays aligned with your financial goals.

Timely Advice: When markets are volatile, having professional advice is invaluable. They can guide you on when to stay invested or when to move your investments to other categories.

Goal-Oriented Approach: A CFP will keep your long-term financial goals in mind while recommending changes to your portfolio, ensuring that your investments remain focused on achieving your desired outcomes.

Evaluating Fund Categories
Since you are considering a switch to small-cap or mid-cap funds, here’s a quick evaluation of different fund categories:

Large-Cap Funds: These funds invest in large, established companies. They offer stability and moderate growth. If you want less volatility, consider large-cap funds.

Mid-Cap Funds: Mid-cap funds invest in medium-sized companies that have high growth potential. They offer higher returns than large-cap funds but are also more volatile.

Small-Cap Funds: These funds invest in smaller companies that are still in the growth phase. They offer the highest potential for returns but are also the most volatile.

Multi-Cap Funds: These funds invest across all categories – large, mid, and small-cap companies. They offer a balanced approach, combining stability with growth potential.

Best Practices for Future Investments
Continue SIPs: SIPs are a disciplined way to invest in equity markets. They allow you to average out your cost of investment and reduce the risk of market timing.

Focus on Long-Term Goals: If you have long-term financial goals such as retirement, education for your child, or wealth creation, keep your focus on building a strong portfolio with a long-term perspective.

Risk Management: Ensure that your portfolio is diversified enough to manage risk effectively. Don’t put all your money into one asset class or fund category.

Seek Professional Guidance: A CFP can help you review your existing portfolio and make any necessary changes based on your financial goals and risk tolerance. Regular reviews with a professional can ensure that you stay on track.

Final Insights
You have already built a strong investment base, which is commendable. Your ELSS funds have performed well, and you’re considering moving into more aggressive categories. However, before making any moves, consider your long-term goals, risk tolerance, and asset allocation strategy.

Shifting into small-cap or mid-cap funds could boost your returns, but they come with higher risk. Consult with a Certified Financial Planner to ensure that your portfolio is well-diversified and aligned with your financial objectives.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
Money

You may like to see similar questions and answers below

Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 10, 2024

Listen
Money
Thank you for vastly explaining my port folio.....have one question regarding ELSS funds...can I stop investing in one fund wait for balance to mature as every SIP has a lock in period!! what happens when we stop SIP in ELSS funds... we couple both are working so I'm intending for high risk/high return for next 2-3 years...I have also start investing in stock(being cautious)
Ans: Absolutely, you can stop investing in one ELSS fund and allow the existing investments to mature. ELSS funds have a lock-in period of three years from the date of each investment, so once the lock-in period is over for each SIP, you have the option to either redeem the units or continue holding them.

When you stop SIPs in ELSS funds, the existing investments continue to grow, and you retain ownership of the units. However, keep in mind that stopping SIPs doesn't impact the lock-in period of the existing investments. Each SIP installment will have its own lock-in period of three years from its investment date.

If you're looking for high-risk, high-return investments for the next 2-3 years, it's essential to assess your risk tolerance and investment horizon carefully. ELSS funds, especially those investing in small-cap or mid-cap stocks, can be volatile in the short term but may offer higher returns over the long term.

Additionally, investing in individual stocks requires thorough research and a good understanding of the stock market. It's wise to approach stock investing cautiously, especially if you're relatively new to it. Diversification and thorough research are key to managing risk in stock investments.

Overall, it's great that you and your spouse are both working towards your financial goals and are open to taking calculated risks for potentially higher returns. Remember to regularly review your investment portfolio, stay informed about market developments, and adjust your strategy as needed to stay on track towards your goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 16, 2024

Asked by Anonymous - Jul 16, 2024Hindi
Listen
Money
Hello sir I have invested in ELSS fund by monthly Sip of Rs 1000 in 2018 for 5 years the amount is now Rs 1.69 lakh.I want to redeem the amount and again invest to lumsum ELSS for 5 years is this a good decision to invest in ELSS fund.
Ans: You are 40 years old, happily married with two daughters aged 7 and 3. You have real estate worth Rs. 1.50 crores, including two houses (one valued at Rs. 85 lakhs with a monthly rental yield of Rs. 30,000). You have a ULIP with a monthly contribution of Rs. 18,000 for 5 years, with 19 months completed and a corpus of Rs. 4 lakhs. You have just started investing Rs. 50,000 in mutual funds. You can invest Rs. 1.50 lakhs monthly now.

Investment in Mutual Funds
Equity Mutual Funds
Equity mutual funds are essential for long-term growth. They provide high returns over time. You can invest in large-cap, mid-cap, and small-cap funds. Large-cap funds are less risky. Mid-cap and small-cap funds offer higher returns but come with higher risks.

Debt Mutual Funds
Debt mutual funds provide stability to your portfolio. They invest in bonds and government securities. They are less volatile and offer regular returns. You can consider short-term and long-term debt funds based on your investment horizon.

Hybrid Mutual Funds
Hybrid funds invest in both equity and debt. They balance risk and return. They are suitable for moderate risk takers. They provide stability with some growth potential.

Tax-saving Mutual Funds
ELSS funds provide tax benefits under Section 80C. They have a lock-in period of 3 years. They offer good returns and help in tax planning. You can allocate a portion of your investments to these funds.

Selling the House and SWP
Selling the house worth Rs. 85 lakhs can provide a lump sum. You can invest this in a Systematic Withdrawal Plan (SWP). SWP offers regular income from mutual funds. It provides flexibility and better returns compared to rental income. Ensure to consult with a Certified Financial Planner (CFP) to align this with your financial goals.

Investment Strategy
Increase your SIP contributions to Rs. 1.50 lakhs monthly. Diversify your investments across equity, debt, and hybrid funds. Review your portfolio regularly to ensure it aligns with your goals.

Professional Guidance
Seek advice from a Certified Financial Planner (CFP). They can provide a tailored financial plan. Professional guidance helps achieve your financial goals efficiently.

Final Insights
Focus on long-term growth with equity funds. Maintain stability with debt funds. Balance risk and return with hybrid funds. Consider tax-saving ELSS funds. Review your portfolio regularly.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 31, 2024

Listen
Money
I have investments in ELSS (Equity linked Saving Scheme) but discontinued investments. My ELSS giving fair performance and lock in period is over; now due to new regime no further investment is required as such; Now the question is the accumulated ELSS be continue to remain corpus or can be diverted to equity fund for better performance. So, Should I close the ELSS (where lock in period is over) and divert it to Equity fund or let it remain continued as other investments?
Ans: Assessing Your Current Situation
You have accumulated investments in ELSS. These investments have given fair performance. The lock-in period is over. You are considering whether to keep the corpus in ELSS or shift it to equity funds for better returns.

Understanding ELSS and Equity Funds
ELSS (Equity Linked Saving Scheme)
Tax Benefits: ELSS offers tax benefits under Section 80C.
Lock-in Period: ELSS has a mandatory three-year lock-in period.
Equity Exposure: ELSS invests primarily in equities.
Equity Funds
No Lock-in Period: Equity funds don’t have a lock-in period.
High Growth Potential: Equity funds can offer high growth.
Risk Factor: Equity funds come with market risks.
Current Scenario
No Further Tax Benefit: Under the new regime, ELSS doesn’t provide additional tax benefits.
Investment Performance: Your ELSS is performing fairly.
Evaluating the Options
Advantages of Shifting to Equity Funds
Higher Growth Potential: Equity funds might offer better returns.
Flexibility: No lock-in period allows for more flexibility.
Active Management: Actively managed funds can outperform index funds.
Disadvantages of ELSS
Limited Flexibility: Lock-in period restricts liquidity.
Tax Considerations: Post lock-in, capital gains are taxable.
Disadvantages of Direct Funds
Research Requirement: Direct funds need thorough research.
Time-Consuming: Managing direct funds takes time.
Professional Expertise: Regular funds through CFP offer better management.
Recommendations
Consider Your Financial Goals
Long-term Growth: If you aim for long-term growth, equity funds can be beneficial.
Liquidity Needs: Assess your need for liquidity. Equity funds offer better liquidity.
Diversify Your Portfolio
Reduce Risk: Diversification reduces risk.
Balance Returns: A mix of equity funds and other investments balances returns.
Professional Management
Regular Funds: Invest through a certified financial planner.
Expertise: Professional management can enhance performance.
Action Steps
Review ELSS Performance: Regularly review the performance of your ELSS.
Assess Equity Funds: Evaluate equity funds with good track records.
Consult a CFP: Get advice from a certified financial planner.
Final Insights
You have made wise investments in ELSS. Since the lock-in period is over, you have options.

Shifting to equity funds could enhance your returns. Ensure you diversify and balance your portfolio. Professional management can guide you to better performance.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Latest Questions
Nayagam P

Nayagam P P  |3918 Answers  |Ask -

Career Counsellor - Answered on Nov 24, 2024

Listen
Career
Sir i am currently in class 11 th and i just want to prepare for jee mains and advanced 2026 exam so give me some roadmap to achieve and also guide me for computer science
Ans: Shreya, I trust that you have already enrolled in a coaching center, whether it be online or in person, and have finished your eleventh syllabus. (1) If you have not yet created your own short-notes for the 11th syllabus that has been completed, prepare it and continue to revise them every three days until 2026, even after you have commenced studying the 12th syllabus in December 2024. (2) Review the questions that you have incorrectly answered or skipped in mock tests conducted by your Coaching Center and/or practiced independently. (3) In order to increase your rank/percentile by targeting computer science at a reputable college/institute, prioritize mathematics (although all three subjects are equally important). (4) You should be thorough with NCERT books, particularly those pertaining to chemistry, in conjunction with the materials provided by your coaching institute. (5) Have 1-2 reference books for each subject. Not exceeding two. (6) Review the questions that were incorrectly answered or skipped in your mock and practice exams and retake the test. It is advisable to maintain a distinct note-book for these types of questions, which should include answers and elucidating notes, in order to review them repeatedly for all three subjects. (7) Download the SYLLABUS of JEE Main 2025 (available on Google by searching for "JEE Main Information Bulletin") and print it out, as there will be no significant changes to the syllabus in 2026. Maintain it on your study table and continue to update the 11th syllabus chapters and concepts that you have covered to date by marking them with a checkmark. This will boost your confidence if you continue to update the same till November 2025. (8) A slight difference in Syllabus might be visible when you acquire the 2026 JEE Main / JEE Advanced Syllabus. The same can be resolved within 15 days to one month in 2025-26. (9) Increase your productivity by studying for 45 minutes to 1 hour, taking a 10-minute break, and then continuing for 45 minutes. (10) Take a 2-3 minute break every 45 minutes while practicing questions, whether offline or online. This break should consist of closing your eyes and taking long breaths to enhance your concentration and mental capacity. (11) Additionally, it is recommended that you acquire the 20-40 PREVIOUS years question paper book of JEE (Main & Advanced) from Amazon. Arihant's, Disha's, or MTG's publications are recommended. Once you have finished reading a chapter, practice and complete it to determine the extent to which you have comprehended the concepts and to identify areas that require improvement. (12) By October 2025, ensure that you have reviewed significantly more than 90% of the previous years questions. Your confidence will be further bolstered by this. (13) After the mock test is completed at your coaching center, clarify all incorrectly answered or ignored questions and continue to revise and practice them, as these types of questions will significantly disrupt your performance in the actual JEE. (14) If you are a regular school student, inquire with your class teacher about the minimum attendance requirement as outlined in the Board's regulations (State, CBSE, ICSE, etc.). Utilize the remaining 15% by taking time off and preparing for your JEE, if only 85% attendance is required. (15) THE MOST IMPORTANT Value Added Suggestion: Rather than solely relying on JEE, please participate in 5-7 entrance exams/counseling process with a JEE score for getting admission into any one of the private engineering colleges to have a variety of options to select the most suitable one. All the BEST for Your Prosperous Future.

To know more on ‘ Careers | Education | Jobs’, ask / follow Us here in RediffGURUS.

...Read more

T S Khurana

T S Khurana   |197 Answers  |Ask -

Tax Expert - Answered on Nov 23, 2024

Asked by Anonymous - May 11, 2024Hindi
Listen
Money
Can you please suggest on capital gains as per Indian taxation laws arising in the below two queries : 1) property purchased with joint ownership, me and my wife’s name in 2015 at a cost of 64,80,000, housing improvements done for the cost of 1000000 and brokerages of 200000 paid and sold the same property at 10000000 in Dec 2023? 2) 87% of the proceeds got from the deal i.e 8700000, have been reinvested to pay 25% amount in purchasing another joint ownership property in Dec 2023, 3) I have invested in another under construction property in Nov 2023 by taking housing loan, which is on me and my wife’s name worth 1.4 cr, here the primary applicant is me only while wife is just made a Co applicant in the builder buyer agreement and also on the housing loan . So what are the LTCG tax liabilities arising from the above 3 scenarios for FY 2023-2024 and FY 2024-2025. I intend to sale off the property acquired in (2) by Dec 2024 and use that proceeds to close the housing loan for the property acquired in (3), will this sale of property be inviting any tax liabilities if the complete proceeds received from the sale of the property in (2) would be utilised to close the housing loan taken in Nov 2023 for the property in (3) ? Since in FY 23-24, I would be claiming the LTCG from the sale proceeds of 1) invested in the purchase of property in 2), and I intend to sale off this property in Dec 2024, will the LTCG claim be forfeited on the property sale in (1), should I hold this property at least for further 1 year so that sale of this property in 2) will not invite STCG?
Ans: (A). Let's first talk about F/Y 2023-24 :
You jointly sold a Property during the year for Rs.76.80 lakhs (64.80+10.00+2.00), & sold the same for Rs.100.00 lakhs.
You have jointly also purchased Property No.3 (I suppose it is Residential only), for Rs.140.00 lakhs.
You should avail exemption u/s-54 & file your ITR accordingly. Please disclose all details about sale & purchase in your ITR.
02. Now coming to the F/Y 2024-25 :
You intend to Sell Property No.2, which was acquired in 2023-24. Any Gain on Sale of it would be Short Term capital Gains & taxed accordingly.
Alternatively, you may hold this sale of property no.2 (for 2 years from its purchase) & avoid STCG
You are free to utilize the sale proceeds in a way you like, including paying off your housing Loan.
Please note to avail exemption u/s 54 only from investment in property no.3 & not 2.
Most welcome for any further clarifications. Thanks.

...Read more

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

Close  

You haven't logged in yet. To ask a question, Please Log in below
Login

A verification OTP will be sent to this
Mobile Number / Email

Enter OTP
A 6 digit code has been sent to

Resend OTP in120seconds

Dear User, You have not registered yet. Please register by filling the fields below to get expert answers from our Gurus
Sign up

By signing up, you agree to our
Terms & Conditions and Privacy Policy

Already have an account?

Enter OTP
A 6 digit code has been sent to Mobile

Resend OTP in120seconds

x