Start your year with tax saving mutual funds

Arnav PandyaMost investors look towards Equity Linked Savings Schemes (ELSS) as an option at the end of the financial year because they have to complete their tax savings investments. This means a rush during February and March as there is a scramble to ensure that the total amount required to be invested is met. This poses its own risk for them and while the idea of using the ELSS is a good one a small tweak can make all the difference to the manner in which they are investing. Adjusting the time for the investment can ensure that the overall financial target of the year is met and at the same time there is not much to worry about in terms of how the investment will fare.Early financial yearThe need for the investor is to ensure that they start the process of investing in ELSS funds right from the start of the financial year. This by itself is a difficult thing to do because the completion of the previous year’s investments would have left most people exhausted and hence they would want to take some rest and recoup before coming back to the investment process. And even though this is the time when one would not want to make the effort it is essential to do exactly what they don’t like because the payoff from this would be huge in the days ahead. The idea should be that an early start in the financial year in ELSS would be beneficial and this would be the area that needs the most attention.Completion easyThe early start will ensure that the completion of the year’s investments is made easily without much of a disruption. The good part is that it allows the investor to spread out the investments over the entire year when started in April and this does two things. One is that it will lead to a lower amount of investment per month in the ELSS and this is easier to allocate from the available funds as compared to trying to get a lumpsum right at the end of the financial year when there is pressure on funds from all side. The other is that there is the benefit of averaging out of the cost which is essential for an equity oriented investment as this is something that reduces risk automatically. The moment the investment is spread out the monthly figure also becomes low and this is mentally assuring for the investor which increases the enthusiasm to complete the process.Initial painThere can be a time of initial pain because when the first switch is made it would lead to some immediate investments plus also will lead to having to complete some procedures to set the investment up. The initial pain would however be far smaller than the benefits that will flow at a later date both in terms of the manner in which the investment is set up to the fact that it will lead to a slow accumulation that grow in size over a period of time. This also means that just an early start for using ELSS funds is not enough it is also important to get the manner of investments right. The best way is to spread out the investments over the year and ensure that there is a regular monthly figure that is being put there. This will also call for an additional bit of planning and again this is going to be tough but once again it will be well worth the effort because it brings an element of systematic process that sets things up nicely.