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ELSS Lock-in-Period Over – No Rush!

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ELSS Lock-in-Period Over – No Rush!

Investing in mutual funds can be tedious, especially with a volatility of the market that determines your corpus returns, yields all your investments that may not meet all your expectations. However, if you analyze thoroughly, Mutual Funds are beating the traditional investments with a hit through ‘Rate of Returns’. Approximately from 13%-15% on notch as compared to a traditional portion of 7%-8%.

Your Goal for ELSS Investment

ELSS or Equity Linked Savings Schemes is one of the best tax saving mutual funds that are popular amongst investors since they act as a helping hand to create wealth in the long-run and saving tax. Whilst saving being the priority in the tax saving year, ELSS become the goal for the investment; also, helps in meeting long-term goals as well like children’s education, retirement, buying a house or car.

In fact, whilst investing in Equity Mutual Funds, you can consider opting for at-least a horizon of seven years. The longer the period of holding, higher will be wealth creation.

The Advantage of ELSS

Besides serving as an efficient fund shield, it also brings in tax benefits. Claiming tax benefits in ELSS funds is easy. Under section 80c of the Income Tax Act, an individual can claim a tax deduction of up-to 1,50,000 INR per year.

What to do when the Lock-in-Period is Over?

There are many investors that are just waiting for the moment to encash their ELSS investments right after their lock-in is over and simultaneously looking forward to re-invest in a new ELSS for claiming tax benefits. Wake up! This is not a good idea because your investments will hardly make any growth in such a short time, thus putting your financial goals in jeopardy. Still second thoughts?

In fact, your returns may be sub-par or negative. After the lock-in-period is over, make sure you review the performance of the scheme and if by any chance has fallen as compared to the benchmark, prefer shifting your investment amount to another open-end fund just to clock better returns.

A Bit More:

Holding your ELSS investments for a longer period can help you in achieving financial discipline, especially when you are investing through SIP (Systematic Investment Plan) besides reaping all the benefits of rupee cost-averaging.

NOTE: Only if you are trapped in some financial emergency then considering to encash can be good to go.

After the completion of 3 years of lock-in-period, your ELSS investment becomes open-ended with no incidence of a tax or exit load.

Still new to the world of investments? Looking for tax free mutual funds? Let Gulaq help you with as low as INR 100.

 

Disclaimer: Mutual fund Investments are subject to market risks. Please read the scheme documents carefully before investing. 

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1 Comment
  1. karan says

    The ELSS mutual funds invest in the capital market and selected companies, with different capitalizations. You can only claim a deduction of 1.5 lakhs under Sec 80C against the scheme that you have opted for. The returns from the ELSS mutual funds are tax-free, whether opted for capital appreciation or dividend plan. The only drawback of the ELSS scheme is that these funds have a lock-in period of 3 years.

    Many investors opt for these mutual funds, given the decent return offered by them. The investment route can either SIP or a lump sum. Given the volatility in the market, you should opt for a SIP and invest lump sum whenever the market is bearish.

    Advantages of ELSS

    The mutual funds have a 3 year lock-in period as compared to other close ended mutual funds
    These mutual funds have given higher returns in comparison with FD or RDs
    There is no maximum limit to invest

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