I am planning to invest through SIPs in mutual funds and have short listed three ELSS funds in which I can invest Rs 5,000 each every month. I am looking for a low risk investment as it is my first mutual fund investment.

Prachi Pandey, Lucknow

The idea to invest in equity-linked savings scheme (ELSS) is a smart way to invest in mutual funds. These funds have the potential to appreciate in the long run and also provide tax benefits on the contributions you make. Investments in ELSS come with a three year lock-in to claim the tax deduction. You could invest in DSPBR TaxSaver, Franklin India Taxshield and Axis Long Term Equity, which are all ELSS funds with a proven track record and performance history to go with. If you are investing through SIPs in these funds, you should be aware that each SIP has a three year lock-in. To avoid this complication, it would be best if you invest by lump sum in ELSS. You could stagger your investments 2-3 times in a financial year when investing in these funds than investing through an SIP.

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