Will we witness a paradigm shift in 80C investments during COVID-19 and after?
The current Coronavirus outbreak has affected people across the world. Businesses and stock exchanges, too, have seen extremely volatile movements. So, what does it mean for investors like you? Many investors have decided to re-think their portfolio, and tax-saving investments in 2020 may see a shift in priorities. For India, the good news is that the finance ministry has extended the last date for these investments to 30 June from 31 March.
Under Section 80C, you can claim a deduction in the taxable income of up to Rs. 1.5 lakh for investments like Equity-Linked Savings Schemes (ELSS), Public Provident Fund (PPF), National Savings Certificates (NSC), and so on.
ELSS vs Stocks
Indian stock markets have witnessed volatilities in the past few weeks. Though some might say it's only for the short-term, you may be tempted to make hasty decisions. If you're worried about losses, then you can opt for mutual funds.
Equity-oriented mutual funds like ELSS are safer than buying direct stocks. They're also tax-saving, so you must add them to your list of 80C investments. Click here to read more on why ELSS deserve your attention during the tax-saving season.
Large-Funds Are Here to Stay
Even though markets are taken a hit, there's no need to get spooked. Instead of thinking short-term, stay invested for the long-term. Other safe yet stable mutual fund options are large-cap funds.
These equity-oriented funds aren't part of tax-saving investments, but in 2020 you may want to consider purchasing them. The underlying securities comprise of some of the biggest corporate names. During market turbulence, while some small to medium enterprise stocks may take a hit, large-caps tend to remain stable. So if you're looking for some equity participation with a long-term investment horizon, you should consider these funds. Click here to read more on how large-cap funds are one of the best equity funds to have during volatile markets.
It's Time to Take a SIP
Whether you opt for large-cap funds or ELSS, you should have some investment during COVID-19 that will give stable returns. The best way to ensure you get maximum gains and your risk is spread, we recommend you choose a Systematic Investment Plan (SIP) over a lumpsum payment.
With an SIP, you can benefit from rupee cost averaging, where during bearish markets, you can get more mutual fund units. These will then give potentially gain momentum when markets turn bullish. You can understand rupee cost averaging better with an example in this article.
In volatile situations, where things could change by the day, it can be challenging to make any kind of investment decision. One way of dealing with investment during COVID-19 is by not creating a situation of panic. You need to take the view that investments are like marathons and not sprints. At digibank by DBS, we know that you're worried about the next few months. But we also know that in future things will get better. For those times, you'll see your investments grow.
So, hold on to your existing mutual funds, and if you haven't started mutual funds and other tax-saving investments in 2020, now is the time to start. Consider this short-term turbulence as an opportunity for long-term growth. Get started with mutual fund investments today, click here to download our app.