The amount invested cannot be withdrawn before the lock-in period is over.
However, if you are investing in ELSS through SIP (Systematic Investment plan) mode. And you wish to discontinue it for any reason such as low performance of the fund. You can stop investing your future SIP’s into the product. As a result of that, the existing invested units can be redeemed only after the end of the lock-in period.
Meanwhile ,it is advisable to invest in equity with long-term horizon for better returns. In any case the lock-in period should not be confused with maturity period. You can stay invested even after the lock-in period is over. After the lock-in period is over, the ELSS fund automatically converts into a normal open-ended equity fund.
|Investments||Lock-in Period||Risk Profile||Returns (%)|
|ELSS||3 years||Market-related risk||15-20|
|Fixed Deposit||5 years||Risk-free||8-10|
|Unit Linked Insurance Plan (ULIP)||5 years||Market-related risk||8-10|
|National Saving Certificate (NSC)||5 years||Risk-free||8|
|Public Provident Fund (PPF)||15 years||Risk-free||8|
|National Pension Scheme (NPS)||Till retirement||Market-related risk||8-10|
So, if you started investing in ELSS fund through SIP. For instance say in April 2016, you can redeem the units bought from the first installment only in April 2019. Those brought from the investment in May 2016, can be redeemed only in May 2019 and so on. The redemptions can be done on a first-in-first-out basis.
Considering the volatility in equity market. An SIP is best way to invest as it spreads the risk of investing in equities over time. Furthermore it will also averages the cost of buying units. In other words you can avoid the risk of investing all your money just before a market downturn. By investing consistently, your average cost per unit will be lower. Therefore you are less likely to be affected by the adverse fluctuations of the market.
If you are a risk-averse investor, then the ELSS fund should certainly not be a part of your investment portfolio. Since ELSS is a market- linked product. Moreover you invests in equities, the volatility element in it cannot be ignored. Thus, the returns are not guaranteed.
Also the lock-in period act as a limitation in the event of market downfall as you cannot withdraw your investment made before the end of the lock-in period.
One should carefully scrutinize various ELSS schemes before making investments. Gauging your risk appetite and the time horizon for which you can stay invested.Above all it is essential to let you choose the fund that best suits your investment goals.
Best ELSS should be a scheme which gives you wealth in the long-term along with peace of mind. Therefore, before investing a thorough research of the fund is must.
So lastly, don’t get caught in year-end rush. Invest smart and enjoy the twin benefit of Tax saving and capital appreciation.
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