What's ELSS?

n ELSS is the mirror image of a diversified equity fund.

This means the fund manager will invest in shares of various companies across various industries.

What sets it apart is the added tax benefit, something a diversified equity fund does not offer.

ELSS funds have a lock-in period of three years. This could be restricting, but look at the other side of the picture -- the lock-in period prevents unnecessary withdrawals and helps your money grow over a period of time.

If you are wondering why a three-year lock-in period is necessary, it is because you need to take a long-term view when you invest in equity. The real potential of equities starts to show only after a few years. This allows you to ignore the short-term slumps and stay invested for the long haul.