Why investing in too many ELSSs is not a good idea

As March 31 approaches, people tend to make their last-minute investments in Equity Linked Savings Schemes (ELSS) to save on taxes. It is observed that several of the investors actually invest in too many schemes that are warranted. ELSS qualify for tax deduction under Section 80C of the Income Tax Act.

Retail investors do not understand that there can be overlapping of portfolio when one invests in several ELSSs at the same time.

The broader financial plan should ideally dictate how much money should be parked in ELSS schemes. Ideally it is recommended that not more than two ELSS funds from different fund houses should be chosen for tax savings investment. 

Another drawback of investing in too many ELSS schemes is that it becomes difficult to track the multiple investments. Tracking investments can be crucial for creating wealth in long term.

Estimating tax liability in advance and investing in ELSS through a Systematic Investment Plan (SIP) is highly recommended. It is seen that people invest in ELSS in lumpsum mode at the last minute just before March 31.