PGIM India ELSS Mutual Funds

Investment Objective

The primary aim for investors investing in PGIM India ELSS Mutual Funds is to create a diversified portfolio with the benefits of long-term capital appreciation and taxation. The fund majorly invests in equity and similar instruments. Furthermore, being an equity-linked savings scheme, investors look to avail of the deduction from total income, as permitted under the Income Tax Act of 1961, as amended occasionally. The fund is benchmarked to IISL Nifty 500 TRI INR and has 93.18% investment in domestic equities, of which 65.15% is in large-cap stocks, 11.38% is in mid-cap stocks, and 4.58% is in small-cap stocks.

Risks Involved in PGIM India ELSS Mutual Fund

As with any mutual fund, PGIM India ELSS mutual fund is devoid of any risks. This includes market volatility risks, liquidity risks, and concentration risks. Here is a brief guide on the PGIM India ELSS mutual funds risks.

• Market risk: The fund value may go up or down as and when the underlying stock price changes. The fund is exposed to the stock market's volatility as it invests in equity and related schemes.

• Liquidity risk: The fund has a lock-in period of three years, during which the investor cannot redeem or transfer their investment. This may affect the liquidity of the investment and prevent the investor from accessing their money in case of emergencies.

• Concentration risk: The fund has high exposure to specific sectors such as finance, energy, technology, healthcare, and automobile. This may increase the risk of underperformance if these sectors perform poorly or face adverse events. The fund may also take advantage of opportunities in other industries that perform better.

Return Potential of PGIM India ELSS Mutual Fund

Various factors, such as market conditions, the fund's performance, the fund manager’s strategy, and the investor's investment horizon, come into play regarding PGIM India ELSS Mutual Fund Return potential. Historically, ELSS funds have delivered average returns of around 12%-15% over five years. However, PGIM India MF ELSS funds do not guarantee assured returns, and the fund performance may vary from one period to another. The PGIM India ELSS Tax Saver Fund has given 31.33% annualised returns in the past three years and 13.49% in the last five years. The fund has also outperformed its benchmark Nifty 500 TRI in most periods. The fund has delivered 14.57% average annual returns since its inception.

Who Should Invest in PGIM India ELSS Mutual Fund?

Investors with a higher appetite for risk and are interested in capitalising on equity and similar investment instruments can consider investing in PGIM India ELSS Mutual Fund. Moreover, as these funds come with taxation benefits, anyone looking for additional benefits of income tax saving apart from higher returns expectations can also invest. Other than that, some of the pointers for the investor category are as follows.

• Individuals who stay invested for at least three years are ready for moderate losses.

• One who wants to achieve long-term goals like children’s education, retirement planning, and buying a home.

• Anyone who is a first-time investor wants to experience equity investing and mutual funds while also availing of tax benefits.

Things To Consider Before Investing in PGIM India ELSS Mutual Fund

There are a few things to consider before investing in the PGIM India mutual funds. These can include getting acquainted with the investment composition, lock-in period, frequency of investment, assessing risk levels, and researching the fund manager. Here are some pointers on the prerequisites of investing in PGIM India ELSS mutual funds.

• Consider the composition of ELSS fund capital allocation. The fund invests at least 80% of its assets in equity instruments, making it highly risky. Majorly, the fund is exposed to sectors including finance, energy, technology, healthcare, and automobile. It could be a plus if one has a certain degree of awareness about the market performance of these sectors.

• Research about the lock-in period. Liquidity, redeemability, and capital transfer may not be possible with lock-in policies. Assess whether it will be feasible for you to invest without fund accessibility for a certain period.

• A Systematic Investment Plan or SIP is a way to regularly invest small amounts in mutual funds. It allows the investor to benefit from rupee cost averaging, which brings down the average cost of purchase of the mutual fund units. It also helps in averaging market fluctuations and building a disciplined investment habit. SIPs are especially beneficial when the markets are falling or volatile.

• It is advisable to have one or two ELSS funds that suit your risk profile and investment objective.

• Investors should know their risk appetite and investment horizon before investing in ELSS funds.

Tax on PGIM India ELSS Mutual Fund

The investor can claim a deduction of up to Rs. 1.5 lakh from their taxable income by investing in ELSS funds under Section 80C of the Income Tax Act, 1961. This can help the investor save tax up to INR 46,800, depending on their tax slab. Moreover, the returns from ELSS funds are subject to long-term capital gains tax (LTCG) at the rate of 10% on gains exceeding INR 1 lakh in a financial year. The dividends received from ELSS funds are also taxable in the hands of the investor as per their income tax slab.