IDBI ELSS Mutual Funds

IDBI ELSS mutual funds are diversified equities funds that give their customers a chance to build long-term wealth in a tax-effective way. These funds are perfect for investors with a higher risk tolerance because they have a 3-year lock-in period. The two IDBI ELSS mutual fund schemes provide dividend options to investors, who will get some gains during the lock-in period. The IDBI ELSS mutual fund NAV as on December 14, 2022, for IDBI Dividend Yield Fund is INR 17.82, and IDBI Equity Advantage Fund is INR 40.65

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Investment Objective

Investors can amass money over time using diversified equity funds, such as the IDBI ELSS mutual funds. The primary investments of the fund are, in accordance with its mandate, stock and equity-related instruments in a predetermined ratio. To ensure that the IDBI ELSS mutual fund return continues to fulfil expectations, the fund manager will select high-quality securities after extensive research. Three years is the lock-in period for these funds.

Risks Involved in IDBI ELSS Mutual Fund

When compared to debt funds and balanced funds, the IDBI ELSS mutual fund risk ranges from moderately high to high. The price of the underlying stock may cause changes in the IDBI ELSS mutual fund NAV. The IDBI ELSS mutual fund performance could be impacted by changes in interest rates, currency exchange rates, governmental policies, tax laws, and other economic factors. Due to their well-diversified portfolios, these funds are less hazardous than pure small- and mid-cap funds as well as sector- and theme-based funds. Additionally, if a purchase is made over a long period of time, the risks might average out. Investors may consider their own level of risk tolerance before making an investment in the plan.

Return Potential of IDBI ELSS Mutual Fund

IDBI ELSS mutual fund returns come in the form of capital appreciation and monthly dividend payments. Capital appreciation results from increases in the underlying stock values over a particular time period for investing. The fund manager can choose the asset allocation during the three-year lock-in period without being concerned about frequent fund redemptions. This thorough approach may result in superior long-term returns. Historically, for a period longer than five years, the IDBI ELSS mutual fund returns have ranged from 12% to 15% on average. The returns, however, are not ensured, and they may perform differently over time. To boost returns, an ambitious investor can consider adding a few small- or mid-cap funds to their overall portfolio.

Who Should Invest in IDBI ELSS Mutual Fund?

The ideal choice for those who are more willing to take on risk is IDBI ELSS mutual funds. These funds' three-year lock-in time is the shortest when compared to other tax-saving options, making them ideal for long-term, tax-efficient asset creation. The best IDBI ELSS mutual funds can help investors reach long-term goals like paying for a child's education, saving for retirement, or buying a home. For the investment to reach its full potential throughout the lock-in period, it must be kept up. This might also imply that only surpluses that won't be immediately needed are kept in these accounts.

Things To Consider Before Investing in IDBI  ELSS Mutual Fund 

Investors must consider the following before investing in IDBI ELSS mutual fund schemes.

Investment Horizon

In order to think about investing in ELSS funds, investors must have a horizon of at least five years. They must have a longer investment horizon due to the equity exposure of ELSS funds in order to lessen market volatility.

Returns

ELSS funds are solely based on the performance of the underlying stocks; they cannot guarantee returns. However, compared to other tax-saving investment options, having an investment horizon longer than five years can offer better returns.

Lock-in period

The lock-in time for these funds is three years. This means the assets will be locked in for three years starting on the investment date, during which one cannot redeem their holdings.

Tax on IDBI ELSS Mutual Fund

In accordance with the rules of Section 80C of the Income Tax Act of 1961, IDBI ELSS mutual funds offer tax deductions of up to INR 1,50,000 each year. An investor can avoid paying up to INR 46,800 in taxes as a result. It must be kept in mind that the investments are locked-in for three years starting from the investment date. The investment is deducted from their taxable income in this case, thus, decreasing their tax obligation.

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Frequently Asked Questions (FAQs)

How is IDBI Mutual Fund doing?

IDBI mutual fund house has an AUM of INR 4120.61 crore as of March 2022. The Indian financial markets have recognised the fund house schemes to be one of the best-performing schemes.

Is IDBI Mutual Fund Safe?

Mutual funds are subjected to market risks. However, the fund managers of IDBI mutual funds invest to maximise the returns and minimise the risks.

Is it good to invest in equity funds?

Tax deductions and wealth building over time are two advantages of investing in ELSS mutual funds. The shortest lock-in period of all tax-saving investments is three years, and the funds have the potential to deliver the highest returns among 80C choices.

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