My returns from MFs during last 7-8 years have been about 10% CAGR. Does it make sense to shift to 2-3 ELSS funds by SIP in next 3-5 years?
Ans: It's impressive to hear about your consistent returns from mutual funds over the past several years. A 10% CAGR is indeed a commendable achievement and reflects your prudent investment decisions.
Considering your investment horizon of 3-5 years, shifting to 2-3 ELSS funds by SIP can be a strategic move. Here's an evaluation of this approach:
• ELSS funds offer the dual benefit of tax savings under Section 80C and potential wealth creation through equity investments.
• By diversifying your portfolio across multiple ELSS funds, you can spread your risk and potentially enhance your returns.
• SIPs in ELSS funds allow you to invest systematically, taking advantage of rupee-cost averaging and reducing the impact of market volatility.
However, it's essential to consider a few factors before making this shift:
• ELSS funds have a lock-in period of 3 years, which may affect liquidity if you need to access funds before that period.
• Ensure that ELSS funds align with your risk tolerance and investment objectives. They predominantly invest in equities, which can be volatile in the short term.
As a Certified Financial Planner, I recommend conducting a comprehensive review of your financial goals, risk tolerance, and investment strategy before making any changes to your portfolio. Seek professional advice to ensure that your investment decisions are in line with your overall financial plan.
Remember, the key to successful investing is to stay informed, stay disciplined, and seek guidance when needed.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
