It's the equity element that gives ELSS it's unique wealth-creation abilities
How to get sustained high returns?
This is one of the most frequently asked questions in the field of finance. The answer is simple: invest systematically. Over time, the impact of compounding will help you in generating higher returns. This easy to follow approach is applicable to every type of investor, from the low-risk taker to the ones with a higher risk appetite. The outcome for both will be the same, the only difference being that the low-risk taker will take a longer time to build a large kitty over the one who is willing to take bolder risks.
To illustrate this method, we built five different scenarios taking into account investments in four different instruments:
- Average of equity funds over a 20-year history; and
- Sensex Total Return Index, which is nothing but Sensex which also includes dividends.
In each instance, we took Rs 1.5 lakh as an annual investment because this is the upper limit of what one needs to deploy each year to claim deduction under Section 80C to save on income tax. We took the actual data over the past 20 years of each these instruments to demonstrate wealth creation. Remember, the last two decade includes phases of ups and downs, scams, global events and events local to India, which collectively factor in the impact of these events on our finances.
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