Sir, which is better option for I T saving U/S 80 C from ELSS MF or SCSS(Sr citizen saving scheme.)?

Ans: All funds seem to be decent and can be continued.

Ans: Hi Ashok Jadhav. Age plays a major role in this, especially if a person's age falls before retirement. ELSSS should be considered.

There is a difference in lock-in period, risk appetite, and returns between the two options -- MF and SCSS.

You can choose ELSS with better returns if you are willing to take moderate risks. SCSS may be a good choice if you want your capital protected with returns similar to those of an FD.

Ans: Hi Umesh
May be better to go with the new tax regime as it may reduce your tax by about Rs. 93000

Ans: For senior citizens looking to invest in tax-saving mutual funds (Equity Linked Savings Schemes or ELSS), several factors need consideration, including risk tolerance, investment horizon, and financial goals. Since ELSS funds come with a lock-in period of three years and invest primarily in equity, it's essential to choose funds that align with your preferences and objectives.
Here are a few considerations and recommendations for senior citizens investing in ELSS:
1. Risk Tolerance: Evaluate your risk tolerance, as ELSS funds are equity-oriented and subject to market volatility. If you have a lower risk tolerance, consider balanced funds or debt-oriented funds with tax-saving benefits.
2. Investment Horizon: Determine your investment horizon and assess whether you can stay invested for the ELSS lock-in period of three years or longer.
3. Past Performance: Review the historical performance of ELSS funds, focusing on consistency and long-term returns. Look for funds with a track record of delivering competitive returns over various market cycles.
4. Fund Manager Expertise: Assess the expertise and track record of the fund manager managing the ELSS fund. A skilled and experienced fund manager can add value through strategic investment decisions.
5. Expense Ratio: Consider the expense ratio of the ELSS funds, as lower expenses can enhance your overall returns over time.
It's essential to conduct thorough research, consult with a financial advisor, and carefully evaluate your investment options before making any investment decisions. Additionally, consider your overall financial plan, including asset allocation, diversification, and risk management, to achieve your long-term financial goals.

Ans: Your disciplined approach to mutual fund investments at such a young age is impressive. Building a portfolio of Rs. 14 lakhs by 31 shows dedication. Your portfolio structure—spread across ELSS, small-cap, hybrid, and index funds—requires a closer look, especially with your early retirement goal by 50. Let’s explore whether to continue with ELSS or shift your focus.

Key Observations
Long-Term Commitment to ELSS:
Two ELSS funds together form 50% of your portfolio (Rs. 7.4 lakhs). This is higher than ideal for tax-saving funds, which can lead to over-dependence.

Tax Implications Post-50:
After retirement, tax-saving benefits from ELSS will be irrelevant since you may no longer need deductions. Therefore, you need a plan to rebalance before your retirement.

Index Fund Allocation Needs Attention:
Index funds track market indices but lack active management. Actively managed funds can outperform during volatile markets. This needs careful consideration, as you're relying on index funds for returns.

Switch from Old Pension Scheme to New Pension Scheme:
The New Pension Scheme (NPS) saves taxes but locks your money until retirement. This limits flexibility. Let’s evaluate ways to align tax-saving investments with your early retirement goal.

What to Do with ELSS Funds
Continue Only Until ELSS Lock-in Ends:
ELSS investments come with a 3-year lock-in. Once completed, you can redeem gradually and move to other funds.

Switch to Diversified Equity Funds:
Since you won’t need tax deductions post-retirement, gradually redirect from ELSS to equity-oriented funds for long-term wealth creation.

Reduce Dependence on ELSS Over Time:
As your retirement approaches, reduce exposure to tax-saving instruments. Focus on balanced growth through small-cap, hybrid, and flexi-cap funds.

Review of Index Funds and Suggestion for Better Alternatives
Disadvantages of Index Funds:
Index funds follow the market but lack flexibility during market corrections. They can underperform during volatile periods or sector downturns.

Benefits of Actively Managed Funds:
Actively managed funds allow professional managers to react to market changes and deliver superior returns. Investing through Certified Financial Planners (CFPs) ensures better fund selection over time.

Portfolio Restructuring Suggestions
Limit ELSS and Add Growth-Oriented Funds:
Gradually move away from ELSS towards multi-cap, small-cap, or hybrid funds. These funds are better suited for wealth creation.

Create an Emergency Fund:
Plan for an emergency fund in liquid investments, especially since you are aiming for early retirement.

Include Hybrid Funds for Stability:
Hybrid funds offer the benefit of balanced risk by investing in both equity and debt. They are a good addition as you approach 50, giving a cushion against market volatility.

Monitor Tax Liabilities from Mutual Funds:
Keep in mind that LTCG over Rs. 1.25 lakh from equity funds attracts 12.5% tax, while STCG is taxed at 20%.

Aligning with Retirement at 50
Plan for Regular Withdrawals:
Since you aim to retire by 50, systematic withdrawal plans (SWPs) can generate regular income.

Increase Focus on Balanced and Growth Funds:
Gradually allocate more to multi-cap and hybrid funds to ensure both growth and stability over the next 20 years.

Factor in Inflation and Healthcare Needs:
Ensure your portfolio can generate inflation-adjusted returns, as expenses will rise post-retirement. Consider health insurance to cover medical costs.

Maximise NPS Benefits Until Retirement:
Continue contributing to the NPS until you turn 50, as it offers tax savings and ensures retirement income. Be mindful of withdrawal rules to avoid penalties.

Finally
Your portfolio is on the right track, but it needs minor adjustments for early retirement. Gradually reduce dependence on ELSS funds and shift towards hybrid and equity-oriented funds. Active fund management will provide flexibility and growth, ensuring you meet your financial goals by 50. Keep tax-efficiency in mind while rebalancing, and leverage professional advice to stay on track.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment