It's the equity element that gives ELSS it's unique wealth-creation abilities
How to get sustained high returns is one of the most frequent asked question from the field of finance. The answer is simple; invest systematically and over time, the impact of compounding will help in generating returns. This easy to follow approach is applicable to every type of investor; the low risk taker to those who can take more risk. The outcome for both will be the same; the difference being a low risk taker will take longer time to build a large kitty over the one who is a willing risk taker.
To illustrate this method, we built five different scenarios taking into account investments in four different instruments: the PPF, the average of equity funds over a 20-year history, and the Sensex Total Return Index, which is nothing but Sensex which also includes dividends.
In each instance we took R1.5 lakh as 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 to our finances.
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