India Infoline News Service | Mumbai | December 30, 2017 18:41 IST
Learn about ELSS investment & answer to all your questions like what is ELSS, how to invest in ELSS, tax benefits in ELSS at Indiainfoline
Equity Linked Savings Scheme or ELSS funds are a type of mutual funds whichbase their returns from the equity market. These funds are tax saving in nature and are eligible for a tax deduction of up to Rs1.50 lakhunder Section 80C of the Income Tax Act. Below are a few things that an investor must know before investing in ELSS funds.
What is ELSS?
ELSS schemes are a category of mutual funds promoted by the government in order to encourage long term equity investments. Under this scheme, most of the fund corpus is invested in equities or equity-related products.
Types of ELSS:
There are two categories in ELSS mutual funds i.e. dividend and growth.
The dividend fund is further divided into Dividend Payout and Dividend Reinvestment. If an investor opts fordividend payout option, he receives the dividend which is also tax-free,however,underthe dividend reinvestment option, the dividend is reinvested as a fresh investment to purchase more shares.
Under the growth option, an investor can look for longterm wealth creation. It works like a cumulative option whose full value is realized on redemption of the fund.
How to invest in ELSS?
One can invest in ELSS via two methods i.e. lumpsum or SIP.
SIP or Systematic Investment Plan, is a process where an investor needs to invest a fixed amount of money every month at a specified date. SIP inculcates a disciplined approach towards investing in an investor. SIP also gives the benefit of rupee cost averaging to an investor.
What is the lock-in period in ELSS?
ELSS funds have a lock-in period of three years. Whencompared to EPF, PPF, NSC and other prevalentinvestments under Section 80C, ELSS has the shortest lock-in period.
What is the benefit of tax in ELSS?
The primary purpose of any investment is to gain deductions under income tax for wealth creation. ELSS funds fit that bill perfectly. An investor gets a doubleedged benefit of tax saving and wealth creation at the same time. Dividends earned from ELSS funds are also exempted from tax. ELSS funds also provide the benefit of long term capital gains as they have a lock-in period of three years.
What is the investment limit of ELSS funds?
One can start investing in ELSS mutual funds with a minimum amount of Rs500, and there is no upper limit on how much a person can invest in ELSS funds. However, the tax saving ceiling is only up to a maximum of Rs1,50,000 a year.
What are the risks involved in ELSS funds?
ELSS mutual funds do not have ironclad guarantee over returns, as theygenerate their earnings from investments in the equity market. Nevertheless, some of the best performing ELSS mutual funds have given consistent and inflationbeating returns in the longrun. This quality is not possessed by the other fixed income tax saving investments like PPF andFD.
ELSS mutual fund investment has now become a popular tax saving investment under Section 80C, and it is also ideal for retirement planning and wealth creation coupled with the benefits of lower lock-in period, SIP method of investment, rupee cost averaging risk and no tax on dividends or the benefit of capital gains. ELSS funds should be taken into account by every investor while planning their investment goals.
Disclaimer: The contents herein is specifically prepared by ‘Dalal Street Investment Journal’, and is for your information & personal consumption only. India Infoline Limited or Dalal Street Investment Journal do not guarantee the accuracy, correctness, completeness or reliability of information contained herein and shall not be held responsible.
Everyone wants to be financially secure and well off by the age of 35-40. However, when we are in our 20’s, we tend to live life in the moment and forget saving for the future.
By: Sanjeev Sinha | Updated: November 27, 2017 2:25 PM | Financial Express
All of us have various financial goals in life. Everyone wants to be financially secure and well off by the age of 35-40. However, when we are in our 20’s, we tend to live life in the moment and forget saving for the future. This is not the right approach towards creating wealth. Therefore, to ensure that you are financially secure and on the right track with your money, here are 5 important investments that you must make before you hit your 30-year milestone:
1. Investment towards tax saving
Considering that you are working and earning, it is important for you to assess your tax liability and take advantage of tax deductions available under Section 80C of the Income Tax Act. “By proper tax planning, you can not only reduce your tax liability but also save some more to invest towards your other goals. One of the best tax-saving instruments is Equity-Linked Savings Schemes (ELSS). It is a type of open-ended equity mutual fund wherein an investor can avail a deduction u/s 80C up to Rs 1.50 lakh for a financial year,” says Amar Pandit, CFA and Founder & Chief Happiness Officer at HapynessFactory.in.
2. Investment towards emergency corpus
There are various events like accidents, illnesses and other unforeseen events that we may encounter in our lives. These events should never occur, but if they do, one needs to be adequately prepared for the same. In critical cases, such events may hamper one’s ability to work and may even lead to a loss in earnings for a few months or years. Hence, “it is advisable to build a contingency corpus, which is equivalent to at least 5-6 months of living expenses. Further, your emergency fund should be safe and easily accessible (liquid in nature) at short notice, in case of an emergency. Hence, savings bank accounts and liquid mutual funds are two options for setting aside the emergency corpus. However, considering that liquid and ultra-short term mutual funds are more tax efficient in nature, it is advisable to park a major portion of your corpus in the same,” says Pandit.
3. Investment towards long-term goals
It is very important to save and invest towards your long-term goals such as marriage, buying a house, starting your own venture, retirement, and so on. You must start with determining how much each goal will need and the savings required to achieve the goal. Once the corpus is fixed, you can invest towards the goal regularly. As an investment strategy, start fixed monthly investments – SIPs (Systematic Investment Plan) in mutual funds. Always remember, the earlier you start investing towards your goals, the longer time your investments will have to grow and the more you will benefit from the power of compounding. Equity mutual funds which are growth oriented are a preferable investment option for long-term goals.
4. Investment towards short-term goals
There are many short-term goals that are recurring in nature, such annual vacation, buying a car or any asset in the near term and so on. For such goals, you are advised to park your funds in liquid or arbitrage mutual funds rather than a savings account. “Mutual funds are more tax efficient than savings accounts and also there are different funds for different time horizons. For example, for goals to be achieved within a year, you can opt for liquid or ultra-short term funds whereas for goals to be achieved post one year, you can opt for arbitrage funds,” advises Pandit.
5. Investment towards health and life cover
Life and health insurance typically are not supposed to be considered as investments. However, both are very important and must be considered as one of the priority money move to be made before turning 30. If you are earning and have a family dependent on you, you must assess and buy the right life insurance term cover for yourself. Further, with costs of health care and medical on the rise, any untoward illness without sufficient cover will have you dip into capital which is unnecessary. Hence, there cannot be any compromise on health insurance. Thankfully, there are various health covers available in the market today. You should opt for the right cover for yourself, depending on your needs and post considering all the options.
The primary objectives of ELSS investments are long-term capital growth and tax saving.
Navneet Dubey | Nov 10, 2017 09:47 AM IST | Source: Moneycontrol.com
Most investors who invest in equity-linked savings scheme (ELSS) do so to save taxes under Section 80C of Income Tax Act. However, they tend to forget that the ELSS schemes can also help them to achieve their financial goal if they remain invested for a long time.
“The primary objective of ELSS investment is long-term capital growth and tax saving. Superior long-term growth is facilitated by the power of compounding. Power of compounding works best over a long investment horizon when gains are reinvested every time they accrue,” said Rahul Parikh, CEO, Bajaj Capital.
The schemes under ELSS category also gives you high inflation-beating returns, similar to PPF they also provide you EEE (exempt-exempt-exempt) benefit.
However, make sure you don’t commit the usual mistakes while investing in ELSS. Here are some of the common mistakes investors make while investing in these schemes:
Trying to time the market: Do not try to time the market when you are investing. Unless you have seasoned investors with a phenomenal understanding of the market, the chances are that you might not be able to identify the precise time to invest.
Ajit Narasimhan, Head – Savings and Investments, BankBazaar said that there is a high amount of uncertainty which makes it next to impossible to correctly predict events or their impact on the market and hence to time the market. Instead, focus on identifying a few good funds. Once you invest, have the patience to ride through the rough and tumble of the stock markets. “Equity investments grow by staying systematically invested for the long run. This is what makes SIP a good option as it averages the cost of investment over time and cancels out the effect of price fluctuation in the market,” he said
Not understanding the fund category: It very important to understand that most of the AMC’s design their ELSS tax saving mutual fund scheme on the basis of large cap, mid cap/small cap and accordingly their risk and returns vary. Here it is vital to first know your risk taking capacity that whether you will be able to risk or not. Take help from your financial adviser to know all holdings mentioned in your scheme and then choose the fund accordingly.
Investing at the last minute: Investment should be a planned activity and not at the spur of the moment.
Narasimhan points out for investments to be successful and provide the required returns, investors should have a financial goal in mind and a plan to work towards it. Leaving it to the last minute can lead to insufficient time to set your goals or create a viable investment plan. “Lack of time may imply that you may have to cut down your research and depend on someone else’s research and opinion to base your investment. This can be very dangerous as the goals, requirements, and risk appetite may not match. It may also cause the investor to invest in one go instead of small regular SIPs. This is an important factor as SIPs provide price averaging and take away the need to time markets,” he said.
Redeeming soon after the lock-in period ends: Minimum investment time period in equities should ideally be for 5-7 years and when you take a decision of redeeming your units before time as mentioned thereon, you may not gain much from it. The longer you remain invested, the more you gain from compounding effect and rupee cost averaging principle. You should always link your investment with a long time horizon financial goal.
Investing in too many funds: ELSS funds have a lock-in of 3 years, If you are investing in too many funds of the same category then it may become difficult for you to review your portfolio since you cannot exit before 3 years. Moreover, too much of diversification may also not help you in proper asset class analysis.
Choosing the dividend option: You should opt for growth option while investing in ELSS mutual fund schemes because if you opt for the dividend, you can lose on gaining from compounding effect. Parikh also said that investing in a growth option ensures that gains are reinvested and grow at the same rate as the principal investment. “However, in dividend payout option, the gains are not reinvested but are paid out and hence not available for compounding, resulting in lower long-term returns. When investing for long-term capital growth in any of the equity mutual fund, one should opt for the growth option,” Parikh said.
Suresh KP | Feb 15, 2017, 05.48 PM | Source: Moneycontrol.com
Investing in tax saving ELSS mutual funds would help you to save tax u/s 80C as well as giving superior returns.
Many of the tax payers are looking for various options to save income tax u/s 80C. While there are several options to save tax, one of the attractive ways is to invest in tax saving funds, technically known as ELSS.
What are tax saving funds?
Equity Linked Saving Scheme (ELSS) or tax saving funds provide tax exemption u/s 80C along with higher returns compared to any other tax saving option. Investments in ELSS upto Rs 1.5 lakh bring in tax deduction under section 80C.
Compared to other tax saving schemes like Tax saving FD, PPF, NSC etc, ELSS offers higher returns. However, a point to note is that these returns are not guaranteed. These ELSS have low lock in period of 3 years. Other instruments have lockin period ranging between 5 years to 15 years.
After taking into account these benefits lets look at five ELSS that can be considered as good investment options to save tax and create wealth.
1) Reliance Tax Saver Fund
This MF scheme objective is to generate long term capital appreciation from a list of stock portfolio and invests predominantly in equity and equity related instruments in India. This scheme has provided 20.3% annualized returns in last 5 years. Even in last 3 years, this scheme provided 30% annualized returns. This scheme is ranked by Crisil as Rank-3 (1 is vergy good performer and 5 is weak performer)
2) Axis Long Term Equity Fund
This tax saving scheme aims to generate regular long term capital growth from a diversified portfolio of equity and equity related securities in India. This mutual fund scheme is the top performer in the ELSS funds over five years time frame. This scheme has provided 21% annualized returns in last 5 years. Even in last 3 years, this scheme provided high returns of 24.9% annualized returns. This scheme is ranked by Crisil as Rank-4 (1 is vergy good performer and 5 is weak performer)
3) DSP BR Tax Saver Fund
The mutual fund scheme aims to generate medium to long-term capital appreciation from a diversified stock portfolio of equity and equity related securities along with tax savings. This mutual fund scheme is the top performer in the ELSS funds.This scheme has provided 20.4% annualized returns in last 5 years. Even in last 3 years, this scheme provided good returns of 26.6% annualized returns. This scheme is ranked by Crisil as Rank-1 (1 is vergy good performer and 5 is weak performer)
4) Birla SL Tax Relief 96 Fund
This mutual fund scheme aims for long term capital appreciation by investing upto 80% in equity and balance in debt related instruments. This scheme has provided 19.1% annualized returns in last 5 years. Even in last 3 years, this scheme provided good returns of 25.6% annualized returns. This scheme is ranked by Crisil as Rank-2 (1 is vergy good performer and 5 is weak performer).
5) Franklin India Tax Shield Fund
The MF scheme aims medium to long term growth of capital along with income tax rebate. This scheme has provided 17.5% annualized returns in last 5 years. Even in last 3 years, this scheme provided good returns of 24.3% annualized returns. This scheme is ranked by Crisil as Rank-3 (1 is vergy good performer and 5 is weak performer).
Smart investors would invest in a good ELSS mutual funds which helps them to save tax and also provides high returns compared to any other tax saving options.
The author of this article is founder of Myinvestmentideas.com.
NALINAKANTHI V | January 28, 2017 | Hindu BusinessLine
The fund has contained market downsides well while making the most of rallies
As we enter the final quarter of the current fiscal, tax saver funds are now in focus. If you haven’t made your tax saver investment yet, you could use the next two months to invest in tax saver mutual fund schemes.
If you are looking for a fund with a consistent track record, old warhorse Franklin India Taxshield is an option to consider. Of course, equity tax saver schemes are only for those with a moderately high risk appetite and investment horizon of at least three years, since you cannot redeem your investment before that. Even though the lock-in period is three years, this fund will better suit investors with a minimum time frame of five years. Lumpsum investment may be a better option, given the lock-in period.
Launched in 1999, Franklin India Taxshield is among the most consistent performers in the equity linked saving schemes (ELSS) category. Over the last five years, the scheme’s daily one-year return has been higher than its benchmark, the Nifty 500 Index, almost 90 per cent of the time. It scores well on a risk-adjusted performance basis too, with a Sharpe ratio of 0.93. While this is a tad lower than that of peers such as Axis Long Term Equity (1.05) and Birla Sun Life Tax Relief 96 (0.97), it is higher than the average of funds in the category of 0.8.
While the fund has delivered benchmark-beating returns across three, five and ten-year time frame, its performance over a one-year period slipped due to the correction in banking and pharma stocks during September-October 2016. The fund has marginally reduced exposure to these two themes.
Strategies that worked
The fund has been able to contain downsides well during market falls and this has been on three counts.
One, higher large-cap slant compared to other funds in this category cushioned it during turbulent phases.
Second, the fund’s focus on quality stocks and strategy to stay away from momentum stocks also possibly aided performance during down cycles. Moving into defensive themes such as pharma and IT also shielded the fund from volatility.
Likewise, during recovery rallies too, the fund has managed to beat the benchmark by a considerable margin. Right sector shifts aided performance during the pull-back rallies.
Consider this — during the August 2013-March 2015 period, the fund gained nearly 110 per cent. This is higher than the 80 per cent gain for the benchmark during the same period.
Increasing exposure to cyclical themes such as financials, automobiles and industrials provided a leg-up to the fund’s performance.
The fund has managed good returns despite a relatively high expense ratio of 2.48 per cent. Peer funds such as Axis Long Term Equity (1.98 per cent), ICICI Prudential Long Term Equity (2.3 per cent) and Birla Sun Life Tax Relief 96 (2.29 per cent) have had a lower expense ratio.
Over a nine-month period, the fund has increased exposure to cyclicals such as financials, oil and gas, power and auto.
Stability in the economy post remonetisation and recovery thereafter should aid the fund’s performance. It has also reduced exposure to pharma stocks, which have been bogged down by regulatory woes.
Jignesh Shah – Capital Advisors | Jun 28, 2016, 09.36 AM | Source: Moneycontrol.com
How the PPF and ELSS score on various parameters. Here is how you can take an informed decision.
Recently one of my clients asked me – with 2.5% loss in Sensex over last one year, why not avoid tax saving mutual funds and instead go for investment in public provident fund? He has a point when we look at negative returns by stocks. But just one bad year, does not make tax saving funds a bad investment choice. There is much more one should ponder over before taking a decision.
Public provident fund (PPF) and tax saving funds (ELSS) are different products – former is fixed income instrument and the latter is an investment in stocks. ELSS can be a volatile journey and may not suit risk averse investors. However, it comes with the combination of two big advantages – lock in of just three years and a possibility of returns in excess of inflation.
PPF offers tax free assured returns in long term. But the returns may not remain attractive. The interest rate may drop below 8% given the falling interest rate regime we are into.
While some investors may want to include both these options in their portfolio, it makes sense to delve deeper into each one of them before you invest.
PPF – It is a scheme issued by the Government of India under the PPF Act of 1968. It is a fixed income security scheme that enables one to invest a minimum amount of Rs.500 and a maximum of Rs.150,000 per annum. PPF account matures after 15 years. So, the lock-in period for PPF investment reduces every year. Compared to this, with ELSS, every investment is subject to a fresh lock-in of three years.
Returns are not fixed. Interest rate for the year is notified by Ministry of Finance, Government of India. Interest rate for FY2016 is 8.7% p.a. and 8.1% for qtr ended Jun 2016, which is excellent for a debt product.
Individuals who are residents of India can ONLY open an account under the scheme. Only one PPF account can be maintained by an Individual, except an account that is opened on behalf of a minor. Thus, PPF account can also be opened by either parent under the name of a minor. However, each person is eligible for only one account under his/her name. Mother and father both cannot open Public Provident Fund (PPF) accounts on behalf of the same minor. Thus, in case a couple has two children, they can maximum open four accounts i.e. two in their own accounts and two in the name of their children under guardianship of either of the parent. Also, non-resident Indians (NRIs) are NOT eligible to open an account. However a resident who becomes an NRI during the tenure prescribed under Public Provident Fund Scheme, may continue to subscribe to the fund until its maturity on a non-repatriation basis. However, such an account will not be eligible for extension of five years at the time of maturity, if at the time of maturity, an account holder is an NRI. Since 13th May, 2005, Hindu Undivided Family can NOT open an account under the scheme. However, accounts opened prior to that date may continue subscription to their account till maturity. They also can not extend the account any further, after this date.
One can have guaranteed and tax free returns by investing in a PPF account. Currently, deposits under PPF earn interest of 8.10% per annum. PPF investments are tax deductible, along with the fact, that the returns are completely, tax free. The lock in period of the PPF scheme is as long as fifteen years and can be extended in block of five years after maturity. Partial withdrawals can be made on the commencement of the seventh year.
Since, the return in PPF is guaranteed and is backed by the government, there is low risk associated with repayment. However, any investor who parks too much money in fixed-income assets can face other types of risk such as inflation risk. A high rate of inflation would erode the value of your savings. There is an issue of liquidity too – should the investor need the money for some emergency it would be difficult since the PPF has a lock-in period of 15 years
Other Features –
1. Premature withdrawal of funds – PPFs give a hard time when it comes to withdrawing investments before the maturity of 15 years is done. Partial withdrawals are permitted from the seventh year.
2. Loans – Having lock-in periods of 15 years and being stable financial instruments, from the third year, PPFs can easily be used as collaterals for availing loans for vehicles, housing and other secured loans.
3. Investment Security – Provided by the Government of India, PPFs offer rates that rarely change in a major way and are one of the safest possible investments one can make in India.
After initial maturity of 15 years, you can extend your PPF account in block of 5 years.
PPF falls in Exempt-Exempt-Exempt (EEE) category. Interest earned and the maturity amount is exempt from income tax.
Now, let us look at ELSS –
Equity Linked Savings Scheme (ELSS), is an instrument of savings and investment managed by many mutual funds. It is a diversified equity mutual fund. A minimum investment of Rs.500 is required and it has no cap on the maximum investment. It has a mandatory lock-in period of 3 years, after which all the investment and the returns can be withdrawn. These investments offer tax free returns as long term capital gains on equity funds are tax free. dividend on equity based mutual fund is exempt from dividend distribution tax as well. Being equity market linked investments, these have a higher risk, but also present a better case of gaining more returns than any other savings scheme that relies on fixed income instruments.
Other Features –
1. Premature withdrawal of funds – Premature withdrawal of funds from ELSS investments is not allowed – not until the lock-in period of 3 years is over.
2. Loans – Equity Linked Savings Scheme investments are market dependent instruments and can only be used as collaterals for availing loans for vehicles, housing and other secured loans after the lock-in periods are over. Better rates can be availed on loans, if investments are pledged with banks that offer the particular ELSS schemes
3. Comparison of risk and returns –
Should you invest in PPF or ELSS?
Your investment choice should be guided by your investment objectives and your risk tolerance level and liquidity requirements. Investors with high risk tolerance should invest in ELSS, while investors with low risk tolerance should invest in PPF. Over a long time frame, wealth creation potential is much higher with ELSS. Young investors should opt for ELSS, since they usually have high risk tolerance and a sufficiently long time horizon to ride out the volatilities associated with equity investments. As you approach retirement, your risk tolerance goes down and PPF is a better investment option in such a situation. Investors with moderate risk tolerance level can invest in both PPF and ELSS in accordance with their optimal asset allocation strategy.
Salaried individuals are mandatorily required to contribute a portion of their salary to employee provident fund (EPF). The EPF interest rate is similar to the PPF interest rate and the maturity amount is tax free. The EPF contribution of the employee as well as PPF and ELSS investments goes towards the section 80C tax savings. If you are not a salaried individual and looking for some safe fixed income saving option, PPF can be considered.
Returns –ELSS is expected to offer better returns than PPF in long term. Currently, average 5 year compounded return for ELSS schemes is 13.31% pa and average 10 year compounded return for ELSS schemes is 12.86% pa. This is far better than PPF rate of return of more than 8%.
Risks – Over longer term, volatility (price risk) reduces significantly, in equity instruments. There is little risk of capital in PPF, as it is backed by Central Government of India.
When investing, investors must also consider shortfall risk. This is the risk that an investment’s actual return will not be sufficient to generate the money needed to meet one’s investment goals. That is why equity is so crucial in an investor’s portfolio because good equity investments over the long term do provide returns which outpace inflation. According to inflation.eu, the average CPI in India over the past 10 years has fluctuated in wide range of 5.7% (2016) to 12.11% (2010).
If investors invested all their money in fixed return investments like PPF, there is a very high probability that they would not save sufficiently for retirement, unless they were earning obscene amounts of money.
Also, the return in PPF has declined over the years. From 12% at the turn of the century, it dropped down to 11%, then 9.5%, 9% and finally 8%+ where is languished for many years. Between FY12 and FY15 the rate hovered between 8.6% and 8.7%. If you take the average inflation by year, the CPI from 2008 to 2013 has fluctuated between 8.32% and 12.11%. All in all, the PPF has not done an excellent job in consistently beating inflation over the last few years. You need some equity to create wealth.
To sum up, if you are willing to take up some risk go with an ELSS, otherwise it is the good old PPF makes a better bet.
Source : http://goo.gl/30NIYP
By Sanjiv Singhal | Jun 20, 2016, 07.00 AM IST | Economic Times
Interact with a lot of young earners on a daily basis. These are men and women in the first 5-6 years of their working lives, with dreams and hopes that require money to achieve. Some of them are already saving, while others are not, but all are full of questions and want to know how to do it better. It doesn’t matter what job they have and how much they earn; there are mistakes that run through all their stories. Here are some of the most common ones:
“I bought a life insurance policy to save tax.”
The good thing about this confession is that the person understands he made a mistake. For most, it starts at the end of the year when they needed to submit their investment proof to the HR. They scramble around to figure out how and blindly buy an insurance policy (after all, insurance is a good thing to have, no?). Almost every other tax-saving option is better than life insurance. Tax-saving (ELSS) funds are the best option for young earners.
“I wasn’t sure where to invest, so I didn’t.”
When you don’t set aside money regularly, it sits in your bank account and often gets spent. This hurts in two ways. One, it doesn’t create wealth for you, which investing early does. Second, it forms unsustainable spending habits. Start by setting aside 5-10% of your salary every month in a debt fund or in a recurring deposit if you don’t know enough about mutual funds.
“I bought stocks to double my money because my friend did.”
This is a mistake often made due to lack of understanding about how stock investment works and a false sense of knowledge. Greed and stories of exceptional returns also spur one on. The best way to resist this is to check with friends and colleagues about how many actually earned such fantastic returns and how many lost money. Stock investing requires deep knowledge and time. As a young professional, you are better off committing this time to your job.
“I change jobs every year to increase my salary.”
This is not an investing mistake, but one of not investing in yourself. Sticking with a job gives you the opportunity to develop your skills in a specific area. It also gives you the time to learn softer skills – of working with people and managing them. This leads to better career prospects and more wealth.
“I forgot about my education loan.”
A lot of young earners are starting their financial lives with an education loan taken for an MBA or MTech. As they mostly work away from home, they may not get the communication from the bank, or choose to ignore it. The interest mounts up and they are left with a bigger repayment amount. Focus on education loan repayment in a disciplined manner. When you are done with the with the repayment, direct this amount to long-term investments. Avoiding these common mistakes is easy once you know about them. Spending time learning about the principles of money and investing is a good investment to begin with.
(The author is Founder & Head, Product Strategy at Scripbox)