With the tax-saving season having begun, a lot of people are looking at investing in equity-linked saving schemes (ELSS), where they can get equity-like returns along with the benefit of tax saving. However, investors also make a number of mistakes when investing in these funds. Here are some of the common ones that they should avoid.
Beginning late in the year: Many people start investing in ELSS funds only towards the end of the financial year, when the time for showing proof of investment is upon them. This is a poor strategy. One, it could lead to cash flow related problems towards the end of the financial year. The second problem with investing at the end of the year is that it forces investors to invest a lump sum amount. This, in turn, creates the risk of market timing. If the equity markets are up, the investor ends up purchasing the fund’s units at high valuations, which in turn affect his returns.
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