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Should I invest in ELSS via SIP or One-Time Investment?

The saddest part about getting the salary debited in your bank account is the fact that every month it is getting taxed. Yes paying taxes sucks because who wants to give a decent amount from their hard-earned money to the government? You would rather spend it on movies and fancy dinners, wouldn’t you? But as per government rules, any individual whose annual income is more than Rs. 2.50 lakh is eligible for tax deductions. In order to save taxes, there are a number of investment schemes available in the market. But if you have a high-risk appetite, you can invest in ELSS because it doesn’t just help you claim tax benefits, it gives you a chance of gaining some decent returns from your investment.

But if you decide to invest in an ELSS scheme, should you do it via Systematic Investment Plan (SIP) or through a one-time investment? Let us find out.

Before that let us find out what exactly ELSS is and also let understand the difference between SIP and one-time investment:

ELSS: Equity Linked Saving Scheme or ‘ELSS’ as we know it is a tax saving scheme under the Indian Income Tax Department’s Section80C. If you invest up to 1.5 lakh rupees in an ELSS scheme, you can claim tax benefits of up to Rs. 46,800. Also, ELSS offers a great chance of doubling your money if you invest in it in the long run.

SIP: Systematic Investment Plan or ‘SIP’ as the term suggests, offers a systematic way of investing money at decided intervals. One of the benefits of SIP is that an investor can choose to invest monthly, quarterly or every six months, depending on the availability of finances. There are times when an investor doesn’t have the entire amount that needs to be invested annually. In such scenarios, SIP comes to the rescue as you can invest little money at regular intervals instead of paying the whole amount at once.

One time investment/Lump sum: Lump sum or one-time investment is a situation where the investor pays the entire amount at the start of the investment cycle.

Should you invest via SIP or Lump Sum?

Both SIP and lump sum have their own perks and cons. The primary factor that distinguishes the two is the varying amount of risk. When investing in SIP your large sum stays secured as you are investing just a tiny portion of your entire investment amount, thus leaving you less exposure to risk. On the other hand, when you invest the entire amount in one go, you are exposing your entire amount to market volatility. So depending on your risk appetite choose whether you want to go with SIP or one-time investment.

Another aspect to keep in mind is the ROI factor. Though lump-sum investments carry higher risk, they do offer a potential chance of gaining better returns in favorable market conditions. On the other hand, when you invest through SIP, you incur lower losses in a volatile market as you are investing at periodic intervals.

So what is it going to be when you invest in an ELSS, an SIP or a one-time investment? Whichever method of payment you choose, while choosing an ELSS you should opt for a Long Term Equity scheme. So if you want to increase your chances of fetching a decent amount of returns from an ELSS investment and save tax at the same time, you should consider investing in a Long Term Equity Growth fund scheme.

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